Mutual fund giant Vanguard Group is reportedly testing a new peer-to-peer foreign exchange trading platform for asset managers, according to a report by Cointelegraph.
The global currency market handles US$6 trillion a day, according to Bloomberg, and relies on banks like JPMorgan Chase and Deutsche Bank AG to facilitate trades.
The trading platform will enable asset managers to exchange currencies with one another, while eliminating the need for investment banks. The report said that Vanguard has been testing this platform for over two months, and has already handled some actual trades.
The system being tested by Vanguard would disrupt the traditional players that have ruled the sector for decades, provided that there are enough users joining the platform, according to Campbell Adams, a former senior currency trader at Deutsche Bank.
“In theory, it sounds great because you can reduce your costs if you can match directly with someone else who has a countervailing interest. Yet it will require a critical mass of users,” Adams said.
Vanguard spokesperson Carolyn Wegemann said, “Vanguard is currently piloting a project focused on improving the efficiency and reducing the risk of FX hedging.” She added that the company aims to “lower the cost of investing for all investors.”
The Vanguard Group is a US-registered investment advisor based in Malvern, Pennsylvania with over US$5.3 trillion in assets under management. It is one of the largest providers of mutual funds and exchange-traded funds in the world.
This is not the first time Vanguard has tapped into blockchain technology. In June 2019, the company reportedly partnered with Symbiont to leverage blockchain to improve how it reviews index data.
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