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B2B FX: Kantox peer-to-peer FX netting solution targeting MNCs

When possible, Kantox offers the opportunity to match your transactions with other companies. In other words, you can buy or sell currencies to other companies, while at the same time side-stepping banks and brokers. It is the most efficient solution to exchange foreign currencies, Approach 1 in Figure below. When no matching is available with another company, Kantox provide access to the wholesale FX market (as they are FCA regulated) to trade at very tight spreads that they are able to achieve thanks to their size, Approach 2 in Figure.


Source & Copyright©2014 - Kantox

By using these two approaches, Kantox is able to provide a one-stop-shop solution with full liquidity in any currency. 

When there is mismatch between companies’ FX requirements, the balance is covered in the wholesale market, which still results in much lower costs. Kantox have found that 78% of their clients are saving more than 80% compared to their banks or brokers. So for every Million USD traded, clients save more than USD 15,000.

How it works

Kantox is an online marketplace in which clients:

  1. Place an order: enter the amount required, the currency need to buy, the one company needs to sell and the delivery date. Then, place order in the marketplace to find a counterparty to match your order.
  2. Transfer the funds: once your order has been matched, transfer the currency you sold to the Kantox segregated client account to proceed to the exchange.
  3. Receive the funds back: Kantox sends back the currency bought on same day, T+1 or T+2 depending on the currency exchanged.

Charges

Current Kantox charges are:

Normally bank charge are much more, even as high as 2.5% and sometimes even higher.

Progress

Kantox was launched in June 2011 focussing on SMEs and mid-cap companies, and by July 2012 they had some 15 companies, mainly Spanish, who had traded through Kantox, with 25 more registered to do so. Today, the Kantox service:

  • covers 25 currencies in over 50 countries
  • serves over 500 companies mainly in Europe, with some in North America and in Asia-Pacific including companies with some $3bn turnover
  • $500m has been traded, and they are now doing daily what took a month in January 2013.

Kantox users like the reliability of the service, the cost savings and the ‘real transparency on each transaction.’

Targeting large MNCs

Kantox are now expanding their service to cater for the FX needs of large MNCs. They are in process of developing a range of new features which will being available over the next 12 months:

  • in next 3 months:
  1. FX alerts: define a specific exchange rate and be informed when the market reach that rate.
  2. target orders: define a specific exchange rate for your order to be executed, for example buy 250.000 USD when the USD/EUR exchange rate peak 0.7658
  • in next 12 months:
  1. connection to clients ERP (financial software) to make the trading process smooth (straight-through-processing)
  2. payments files: client can upload a file on to the platform including many payments in foreign currencies to process.

CTMfile take: These new features can only increase the demand for Kantox FX services. Banks have, for years, been netting off deals to minimise the FX they need to buy/sell. Now a third party is offering this facility direct and transparently to the market. A new paradigm in B2B FX may be just about to take off.

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This item appears in the following sections:
Buying & Selling FX
International Payments