In early November 2022, the IMF published a working paper on a multi-currency exchange and contracting platform (known as X-C) that the authors said could reduce the cost of FX transactions.
X-C envisages a multi-currency environment where intermediaries act as broker-dealers and compete to attract trade from clients. The proposal describes multi-currency auctions as a robust solution that generates competitive outcomes and can be implemented entirely through smart contracts.
The proposal allows for centralized order-book exchanges for dealers, but with dealers also competing on the common platform. It advocates that all participants should be allowed to act as dealers and offer terms of trade on the platform and that posted prices should be hard commitments, with dealers not allowed to renege from their announced terms of trade.
The IMF suggests the centralization of information and exchange of FX trading could contribute to improving markets by boosting transparency and by creating incentives to increase competition.
However, Andrea Michael, director of institutional sales at StoneX Pro, suggests that the existing FX market is already pretty efficient in terms of pricing, and that conclusions around cost are often drawn based on very narrow definitions.
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