Asset managers will be able to trade physical assets directly with each other without incurring multiple transaction fees through a new digital asset class dubbed Assets Backed by Custody (ABC), which represent assets and currencies in one,says Morgan McDonnell, chief operating officer for Abacas, the exchange for ABCs. Abacas will allow managers to exchange assets without buying or selling them in one transaction via ABCs, reducing the cost of trading and fund transfers. “I have been in financial markets for a very long time and I have never been this excited about a product,” says McDonnell, most recently global head of FX, cash and credit markets at RBC Investor & Treasury Services. “If an asset manager wanted to exchange gold for UK equities they would have to sell the gold, buy foreign exchange and then buy equities. ABCs allow them to exchange assets without having to go through all the transactions and instead they can swap through Abacus via ABCs,” McDonnell adds.
The foreign exchange leg of the swap will be a mid-point rate provided. Abacas Product Innovation Consultant, Mark Van Roon says the new exchange brings asset managers and financial technology together in a single delivery model. “Abacas means asset managers can conduct business much more effectively as they have direct access to a whole new source of liquidity, furthering the value proposition.” ABCs will be backed by physical assets held in a trust and under a custodian arrangement for assets. The units will be hard-wired to physical assets, so the intrinsic value of the digital asset will always equal the value of the physical asset. Eva Szalay. Editor.