The Nexus Scheme Rulebook provides detailed obligations for FX Providers. At a high level, these obligations include:
FX Providers must comply with all applicable regulations in the jurisdiction they are based in, as well as the jurisdiction to which they are providing FX.
Sanctions screening when the FXP also acts as Settlement Account Provider
Where an FXP is a member of an IPS and therefore acts as their own Settlement Account Provider, the FXP is responsible for screening the payment against applicable sanctions lists. See Guidelines for Settlement Account Providersfor more detail.
FXPs must commit to providing FX to Nexus for a certain minimum duration and must give a period of notice if they wish to stop providing FX.
FXPs may choose to permanently withdraw from providing FX to Nexus.
The scheme rulebook and governance documents define the process and notice period for withdrawing from the scheme.
Market maker role
In general, FX Providers are expected to play a similar role to that of a market maker; this means that they are obliged to always provide a quote for the payment corridors that they provide. If they do not wish to be committed for new payments, they can set a quote that is below the rest of the market, but they should not “exit the market” by providing no quote at all.
This requirement is necessary to ensure that there is always liquidity available for Nexus payments and to avoid a situation where all FX Providers for a currency channel choose to “sit out” of the market (making payments through that channel impossible). The obligation to always quote also helps to ensure that FX rates will be dynamic and are likely to be broadly in line with other FX markets.
An exception may need to be made for FXPs who do not have the technical capacity to quote 24/7. For example, some FXP who do not have a global presence may only be able to quote in their country’s business hours. In this case, they would be expected to always provide active rates during their business hours but would be able to “exit” the market by withdrawing all their rates at the end of the business day. Over time and as they gain experience with Nexus payment flows, such FXPs should be able to develop the ability to automate rate provision and liquidity management outside of business hours, in order to start quoting 24/5 and ultimately 24/7.
Honouring payment reversals at the original quoted rate
There will be certain cases where Nexus payments must be reversed at a later date. The FXP must accept reversals at the exchange rate that was used in the original payment. This means the FXP takes the risk that market rates may have moved since then, and the FXP may take a profit or loss as a result of the reversal. The number of reversals to be small or negligible relative to overall payment flows, and gains and losses due to reversals should average out to zero over a given time period.