OSTTRA, the global post-trade solutions provider, has expanded the capabilities of its industry-leading portfolio reconciliation service, OSTTRA triResolve, to address timing mismatches in FX.

The new FX Snap Time Prediction Model automatically identifies and flags valuation discrepancies which stem from differences in the time at which the market rate was captured by each counterparty.

The new prediction model uses historical trade valuation data to form an advanced time-series analysis. By combining this data with the prevailing market rate, the model identifies when a trade’s mark to market (MTM) value was determined. It then applies the same analysis to the trading counterparty and calculates whether a discrepancy is caused by a timing mismatch.

According to a recent survey, FX timing mismatches are one of the most common causes of margin disputes, as firms, and even entities within the same firm, take their snaps at different times. Consequently, MTM values frequently diverge based on when each counterparty snapshots the market rate. These small discrepancies can cause margin disputes, which are time-consuming to resolve and can lead to additional capital requirements.

“The FX Snap Time Prediction Model helps our customers solve a long-standing market challenge. By isolating valuation discrepancies caused by snapshot timing, we are helping market participants eliminate false positives, allowing them to focus resources on real risk.”

Carl Thornberg, Head of Optimisation and Analytics Technology, OSTTRA

“FX timing mismatches have historically been a significant operational hurdle. By distinguishing  discrepancies attributable to snapshot timing, operations teams can more efficiently triage exceptions and escalate where further review and oversight may be required.”

Warren Rees, Executive Director, CPG & Collateral Operations, Digital & Platform Services, J.P. Morgan

With a network of more than 2,500 subscribers, OSTTRA is uniquely positioned to address the industry-wide challenge of FX timing, leveraging its scale to solve these discrepancies for the wider market. The system collects and analyses data 24 hours a day, five days a week to fully capture global FX trading.

Following a successful four-week testing phase with nine major firms, the FX Snap Time Prediction model is now live for all clients and we have observed that it successfully predicts the snap times for over 95% of applicable trades for a number of firms. OSTTRA is continuing to enhance prediction rates as well as bringing more insights to the root causes behind exposure differences between market participants.