In today’s rapidly evolving financial landscape, Environmental, Social, and Governance (ESG) initiatives have taken centre stage. Leading this transformation, CobaltFX won the Euromoney award for the Best FX ESG Initiative. This achievement is a testament to CobaltFX’s commitment to not only deliver excellent services but also focus on long-term sustainability and responsibility towards the environment and society.
Technology Driving ESG in FX
CobaltFX’s foundation resonates with a profound concern for the environment. While the financial services sector has made significant strides in green investments, the actual carbon footprint from operational duplicity and inefficiency remains largely unaddressed. The shared ledger infrastructure now allows market participants to reduce their carbon footprint by reducing and ultimately eliminating the need for silo-based post-trade infrastructure.
The shared ledger approach is groundbreaking because it reinforces the mutualism of transactions and related life cycles whilst maintaining the independent duties and roles of all involved parties. Furthermore, it aims to eradicate operational inefficiencies by mutualising and shrinking the amount of infrastructure deployed for those post-trade elements that market participants do not compete on. CobaltFX can essentially become a leading example of how financial services firms can drive toward net zero.
The Advent of CobaltFX
Founded in 2015, with a vision of reengineering the world of FX, CobaltFX has simultaneously worked on strengthening its commitment to a future where sustainability and finance go hand in hand. Distinctly positioned in the industry, CobaltFX introduced tech-driven credit and post-trade infrastructure to eradicate unnecessary duplication of multiple siloed infrastructures. By moving away from legacy technologies and antiquated trade processing, CobaltFX has established a new normal in shared middle and back office infrastructure.
Within the finance sector, changes often stem from regulation, client needs, and profitability. Post-financial crisis, regulators have emphasised orderly market operations and whilst there has been some success it has always been built on top of existing concepts that are out of date and inefficient. CobaltFX’s vision is to uniquely revolutionise this by promoting mutual awareness among trading parties and shifting from isolated systems to shared infrastructure. It endorses a combined middle and back-office, minimising counterparty risk, operational friction, and reducing the sector’s carbon footprint, addressing the pressing global warming concerns that we collectively have to resolve.
In 2022 CobaltFX joined forces with United Fintech. Under that strategic umbrella, a global digital transformation platform, CobaltFX has promoted cutting-edge technology with sustainable practices. United Fintech’s mission of uniting fintechs on a single platform and bridging the gap between them and the financial institutions aligns seamlessly with CobaltFX’s vision. This partnership has greatly facilitated the acceleration of digitalisation within major financial entities.
Innovation at its core
CobaltFX’s technological infrastructure stands on several pillars:
- Golden Trades: A unique method ensuring a single trade version for both buyer and seller, differing only in perspective.
- Normalisation to LEIs: Promoting a universally and regulatory-backed nomenclature.
- Multi-Tenancy with Logical Separation: A system where you can only access what belongs to you.
- Mutualisation: A system-tied agreement between trade parties, enabling functions like Trade Netting, Payment Netting, and more.
Looking beyond borders
CobaltFX realises that industry ESG responsibilities aren’t confined to the countries they operate. The underlying message is clear: the time to address these significant challenges is now, and the responsibility lies with everyone in the FX community.
By designing an infrastructure that streamlines credit management, and middle and back-office functionalities, CobaltFX tackles two challenges, namely reducing operational costs and minimising environmental impact. The shared ledger model stands as a testament to this approach, emphasising that businesses can improve, grow and be environmentally conscious.
Conclusion
Awarded as the Best FX ESG initiative, CobaltFX is an example of a step taken in the right direction. It is an endorsement of a vision that believes in a symbiotic relationship between finance and sustainability. As the company continues to lead the way, one thing remains clear: With technology and the right intentions, the financial sector can be a pivotal force in shaping a sustainable future for all.
Through its innovative products and services, CobaltFX wants to transform the FX market. This dedication has been recognised by Euromoney with the award for the Best FX Market Innovation.
