Giant mutual fund company Vanguard Group is reportedly testing a blockchain-powered foreign exchange (FX) trading platform to allow asset managers to easily trade currencies.
According to a report by Bloomberg, Vanguard Group has teamed up with Symbiont which offers blockchain technology to develop the FX trading platform. The new platform will allow asset managers to easily trade currencies with one another thereby bypassing the investment banking institutions. As per the Bloomberg report, Vanguard has been secretly testing the new solution for the last two month and has allegedly handled some trades so far.
A spokesperson from Vanguard, Carolyn Wegemann, told Bloomberg that the company has been testing the platform that aims at enhancing efficiency and lessen the risks involved in FX hedging. The spokesperson explained that the main aim of the company is to reduce the costs of investing for all investors.
The entry of Vanguard in the forex exchange trading sector is likely to offer the long-sought changes in bank-dominated market. The company has recently brought some changes in the finance sector through introduction of low-cost index funds to the public.
According to Bloomberg, the forex exchange market is estimated to handle about $6 trillion daily and larger banks like JPMorgan Chase as well as Citi are required to execute the trades.
Currently, asset managers must seek the services of banks as intermediaries before a trade can be completed even after the introduction of buy side firms that match trades using electronic services. The platform being piloted by Vanguard will bypass these conventional players as well as their fees.
Speaking to Bloomberg, a former Deutsche Bank senior currency trader who is also the founder of ParFX, Campbell Adams, said that the idea was good in theory since it will help in cutting down the costs but will need critical mass of users if the public will have to enjoy the discount advantage.
At the moment, Vanguard enjoys more than $5 trillion worth of global assets under its management is also the biggest provider of mutual funds in the world. The giant mutual fund provider also offers exchange-traded funds which track various stock indexes.