Capitolis, the technology company reimagining capital markets, announced a significant innovation to its groundbreaking automated novation service in foreign exchange (FX): it can now novate agency trades while maintaining anonymity. This unlocks more of the FX options market for novations by including agency flow and further helps to reduce risk, notional and capital footprint.
Agency novation is a very complex workflow. It requires maintaining anonymity throughout the entire process, and many participants are involved. For these reasons, very few agency novations have been performed up until this point. The FX industry needed a trusted partner with the experience, network and relationships throughout the entire FX options market to get this done. Capitolis is that partner.
Capitolis worked with industry participants for over a year to understand the various market needs and develop its agency offering. The automation of agency flow novations now allows for the collapsing of nearly all boxed FX option positions and the ability to execute a novation even in the most complicated cases.
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“We challenged Capitolis to deliver technology to facilitate agency novation and they delivered,” said Marcus Butt, Global Head of Prime Services at NatWest. “The improved operational efficiencies remove much of the friction that previously impeded these novations. As a result, we anticipate clients more actively optimizing their portfolios.”
“We usually insist that our portfolio managers trade in and out with the same agency brokers, but with this new feature in the Capitolis novation platform, we no longer mandate that requirement,” said Gaurav Prinja, Head of Compression at Brevan Howard. “Now our portfolio managers have a wider liquidity pool from which to choose.”
Since launching the novation service five years ago — the first of its kind for the FX options market — volumes continue to grow. To date, Capitolis has novated over 81,000 trades and reduced total notional by over $9 trillion.
“We partnered closely with industry participants to understand their needs and delivered on them. I’m thrilled that Capitolis is the only provider that can offer agency novation,” said Gil Mandelzis, CEO & Founder of Capitolis. “Our network continues to grow, and we see huge potential as we safely expand execution opportunities within the FX options market, while further helping to reduce its risk and capital footprint.”