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OSTTRA and Baton Systems partner to launch FX PvP service, mitigating settlement risk in FX markets

OSTTRA will operate an on-demand payment-versus-payment (PvP) service, powered by Baton’s proven distributed ledger technology, designed to mitigate settlement risk in the US$2.2 trillion of daily FX turnover settled outside CLS. The service will be open to FX market participants globally – including market maker banks, investment managers, and large corporates. Initial participants include HSBC and Wells Fargo.

LONDON, 06 March 2024 – Global post-trade solutions provider, OSTTRA, announced today the launch of an FX PvP settlement orchestration service designed to mitigate bilateral settlement risk between participants, while optimising intraday funding, liquidity, and credit risk.

The launch of the new OSTTRA service comes after the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) last year advocated an increase in the adoption of PvP in FX transactions to reduce FX settlement risk (or “Herstatt risk”). As of April 2022, the Bank for International Settlements (BIS) said that there could be settlement failures in US$2.2 trillion daily deliverable FX turnover, because it either sat outside PvP platforms or as “on-us without loss protection” trades.

The PvP service will be delivered on proven distributed ledger technology (DLT) from Baton Systems (Baton) and marks a significant milestone in increasing market wide access to PvP, helping to address FX settlement risk concerns. The focus will be on settling flows not currently settled on CLS, including non-CLS eligible transactions such as offshore Chinese renminbi, which has almost doubled in the percentage share of global FX trading volumes from 2019 to 2022 according to BIS. Bank and non-bank market participants will also have much greater flexibility to settle FX transactions intraday, without being tied to the CLS cut-off window.

The launch represents the first step in a broader OSTTRA strategy to improve the market structure of OTC markets. It is intended that the service will evolve to include settle-to-market functionality, significantly reducing derivative counterparty exposures, therefore reducing the regulatory capital required under SA-CCR (Standardised Approach to Counterparty Credit Risk).

The decision to partner with Baton follows an extensive market review and due diligence process conducted by OSTTRA. Baton’s solution already orchestrates the settlement of billions of dollars every day, with settlements to date exceeding US$8.1 trillion in value.

Under the terms of the partnership, OSTTRA will take on the operation of Baton’s award-winning Core-FX service, including administration of the rulebook, which governs the end-to-end process and encompasses the secure orchestration of funds, and which provides the framework for achieving final settlement. HSBC and Wells Fargo, early adopters of Core-FX as part of the HSBC FX Everywhere initiative, will join the OSTTRA operated service during the first half of 2024.

Mark Williamson, Global Head of FX & Commodities Partnerships & Propositions at HSBC, commented: “Since 2018, HSBC FX Everywhere has used Baton’s Core FX technology to settle 16 million FX trades across 13 different currencies totalling US$8.1 trillion. Using OSTTRA as a post-trade platform, the wider market will now be able to use the same technology to reduce their FX settlement risk through PvP settlement and compression, as well as optimising their cash flows. Overall, this will significantly mitigate Herstatt risk in the market.”

Chris Leaver, Chief Strategy and Marketing Officer at OSTTRA, added: “There’s huge scope for further post-trade efficiencies across OTC asset classes: this new service represents an important milestone in the evolution of our FX network, extending existing workflows to reduce settlement risk for thousands of OSTTRA clients. We’re excited to have chosen Baton as a partner in this first step of our journey – their proven technology leads the market in real-world, production DLT solutions for institutional capital markets”.

Arjun Jayaram, Founder and CEO of Baton Systems, further commented: “We’re excited to be collaborating with OSTTRA. OSTTRA is a leading player in the post-trade arena with extensive market reach. Through this strategic partnership, we will jointly accelerate and globally scale access to PvP settlement whilst enabling the Baton team to continue innovating and deploying operationally resilient solutions that deliver modern, cloud-based interoperable technology stacks that make our markets more inclusive, safer, and more efficient.”

Baton Systems is the global fintech company transforming the entire front-to-back post-trade process, introducing interoperable and connected digital market infrastructures from trade matching through to settlement. Empowering financial institutions to take control with automated and configurable rules-based workflows, access to real-time information, and on-demand settlement, Baton’s DLT-based solutions are redefining what post-trade processing should look like: fully connected, friction-free, flexible, and transparent.
Founded in 2016 by Silicon Valley technologists and capital market specialists, Baton’s solutions are now being used by several of the world’s largest financial institutions to facilitate the movement of billions of dollars of cash and securities on a daily basis.

Find more information on how OSTTRA is orchestrating PvP Settlement at


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