The foreign exchange market – a decentralized, over-the-counter market – has grown exponentially in the past two decades with daily volume reaching $6.6 trillion in 2019. However, trading foreign exchange currencies is inherently error-prone and complex. With payment details captured manually by buyers and sellers, on top of the fast-changing regulatory environment, fund managers are now in need of an end-to-end solution to assist in the efficient settlement of their transactions.
With the option to execute spot trades and forward trades, trading in the foreign exchange market often requires a collaboration between several intermediaries. Thus, a centralized, electronic platform for the creation, authentication and submission of FX wires can be a boon for managers by reducing paper processes, driving improved visibility, productivity and cost efficiency, and lowering operational and compliance risks.
SWIFT MT304 and MT300
SWIFT provides a secure method for the settlement of FX transactions. For instance, an asset manager can instruct its custodian to settle a third-party foreign exchange deal by sending a MT304 SWIFT message whereas details of the new contract can be confirmed using a MT300 SWIFT message. Likewise, if there is an amendment or cancellation of the contract, a MT300 message can be sent directly to counterparties with notification.
Overall, the processing of FX trades requires an exchange of multiple SWIFT or non-SWIFT messages between parties – further underscoring the need for a robust, secure and tailor-made solution that is seamlessly connected to the SWIFT network.
IVP Cash Master’s FX Payment System
The IVP Cash Management Solution FX Payment System is capable of processing multi-currency wires and, more broadly, automating the entire settlement process. Using a fully configurable workflow, the solution easily integrates with third-party applications and creates FX payment wires based on the tickets generated – reducing risk and increasing efficiency.