Brokers Still Paying the Price

The internet is full of so-called business gurus peddling solutions to the ‘being busy is no good if you can't get paid’ dilemma.

In the brokerage space – where large amounts of money change hands (virtually) every day of the week – you would think that the process of moving funds from one account to another would be fairly smooth.

Yet a quick glance at the list of exhibitors at next week’s iFX EXPO International suggests that many brokerage firms (and prop trading operations in particular) are still looking for better payment solutions.

One of the key selling points in this business is the ability to pay successful traders promptly. Yet the pages of Reddit and other platforms are full of traders claiming that they are unable to make withdrawals, even when they have funds in their accounts.

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The introduction of the ISO 20022 global messaging standard was meant to improve payment efficiency by increasing the amount of information provided for each transaction. But it appears that fragmentation, disparate systems, manual workflows, and different rulebooks have increased the number of payments that are questioned.

As the data that banks receive becomes more complex, we are seeing more mistakes and more exceptions or investigations being carried out. This creates the potential for reputational risk, as well as causing frustration for payment recipients.

According to SWIFT, more than two-thirds (70%) of investigations take five days to resolve, and over the last 12 months, almost 24 million payment investigation messages have been issued, estimated to have cost the payment industry around $1.2 billion.

So, if you happen to be at the City of Dreams resort in Limassol between the 17th and the 19th of June, don’t be afraid to ask those payment providers what they can do to make sure traders get paid on time.

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Stablecoin – No Longer a Bad Penny?

After what seems like an eternity, Société Générale has broken ranks and become the first major bank to launch a dollar-pegged cryptocurrency. ‘USD CoinVertible’ is expected to make its debut on the Ethereum and Solana public blockchains in July.

Hundreds of billions of dollars’ worth of dollar-pegged tokens have been issued by the likes of Tether, but banks have stayed away until now.

Interestingly, Société Générale has decided that with none of its peers entering the space, there is sufficient demand from institutional customers for a regulated cryptocurrency, which will be available for crypto trading as well as cross-border payments, FX transactions, and cash and collateral management.

There has been a great deal of speculation over which bank would be first to bring a stablecoin to market.

In a late February interview, the CEO of Bank of America suggested it was considering such a move if there was regulatory support. Congress is currently discussing the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 (GENIUS Act), which would establish a regime to regulate payment stablecoins — digital assets used for payments or settlement that can be redeemed at a fixed amount.

It has also been reported that JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup have discussed collaborating on a stablecoin.

It remains to be seen whether Société Générale’s move will encourage regulators to speed up the introduction of new rules around the use of stablecoins. The bank’s cryptocurrency will come under the Markets in Crypto-Assets Regulation (MiCA).

Concerns around security may persist, although there is a school of thought that since bank-issued stablecoins will be backed by the reserves of some of the world’s largest financial institutions – which governments have already shown they are willing to support – and short-term US government debt backed by the US Department of the Treasury, they might actually be safer than a regular commercial bank deposit.

Trading as a Service

A number of major Wall Street names are intensifying their efforts to gain market share in outsourced fixed income product trading.

Jefferies Financial Group is just the latest to boost its trading roster as money managers consider the benefits of reducing or even eliminating in-house trading desks. These include improving access to major counterparties that might otherwise be out of reach.

This shift is not unique to the US. UK-based traders from Liontrust Asset Management this week joined the buy-side trading solutions team at BNY, in a move that will enable the asset manager to operate beyond standard UK trading hours.

This final point is part of a longer-term trend for major institutions, which previously placed great importance on their in-house trading desks, now moving towards outsourcing to extend both their asset class and geographic coverage.

A recent State Street survey showed that almost three-quarters of money managers were keen to use outsourced trading providers for FX execution.

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This demand can be attributed to several factors, including the ability to access better pricing and counterparties – often out of reach for smaller or mid-sized funds – as well as broader access to asset classes and markets. This helps fund managers scale operations and manage risk more efficiently, while keeping costs down and staying compliant.

Outsourced trading can also be useful for asset managers during periods of high trading volume, letting them focus on investor returns while keeping trading costs under control.

As the head of one outsourced trading firm put it recently, if trading is not central to their investment process and they are not putting enough capital into their internal desks, outsourcing allows them to move fixed costs to variable ones and redirect resources to more strategic areas, such as portfolio management and the investment team.

Source: Finance Magnates