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  1. The money Ripple pays Moneygram to subsidize their use of ODL is "contra expense". Its income for Moneygram, but it is used to offset the cost associated with the use of ODL instead of being accounted as revenue.
  2. It was mentioned in one of the articles that now has been removed. I'm cautiously optimistic that there might be some truth behind those claims.
  3. Well it would be new information that they plan to utilize ODL with Santander in the USD <> MXN corridor, wouldn't it? (If it is true...)
  4. I wonder if that is really true though. I work with assessing risk in a bank in the EU (and I'm sorry, but EU regulation is all I know). The EU follows the Basel requirements through the CRR (https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013R0575&from=EN). Article 128(3), which handles the "Standardised Approach" (and lets keep to the standardised approach for simplicity's sake), states that : So exposures in crypto currencies would fall under 3 (b) since there is no obligor to your exposure. This yields a RWA (Risk Weighted Asset, the figure that determines your capital requirement) of 150% of the book value, which is not that high compared to capital requirements for unspecified corporate entities, which is 100% of the book value. The cost of holding crypto assets for banks is only 1,5 times the cost of lending the same amount to an unspecified corporate entity. However, the biggest risk for the banks is of course to be the first mover and to break new ground. The regulation is not specifically covering exposures in crypto assets and to utilise Article 128(3)(b) for those types of assets is inconvenient, since it is a last resort for assets which was not in the regulators mind when constructing the regulation.
  5. So then you would say that the total fee is between 15 and 90 bps, which sounds in line with my previous estimate even if that was in the upper bounds of that range. Your methodology seems solid so I see no reason to doubt your figures. I remember Moneygram somewhere stating that they are selectively applying ODL depending on if the transaction is competitive compared to their alternatives. It would be interesting to see how the total fee for transacting ODL in the MXN/USD corridor develops as volume increases - it should go down in theory. Thanks for your explanation, good work!
  6. This is great! Hope you don't mind sharing your methodology instead of only the result? I can start the discussion by explaining how I think that the correct methodology should look like. Total cost = 0,5 * Spread(USD/XRP) + Slippage(Amount(USD/XRP)) + Exchange Fee(USD/XRP) + 0,5 * Spread(XRP/MXN) + Slippage(Amount(XRP/MXN)) + Exchange Fee(XRP/MXN) Where Spread is the total gap between the currency pair on the exchange, Slippage is the additional effects to the average exchange rate of your transaction due to the volume eating up the liquidity in the orderbook on the exchange and the Exchange Fee is the commission that the Exchange is charging to facilitate the trade. The above does not include any fees from receiving the funds from the exchange which you alluded to, maybe they should be included too? If you use another formula to calculate the cost, what formula do you use and why?
  7. What does "own" in quotations even mean? They have invested $50 million in shares in moneygram and they own more than 10% of the company. Slippage and spread is two different concepts. Spread is the initial gap and slippage is dependent on the size of the trade. We need to count both slippage and spread for each of the two trades. I can't find any figures for this in the other thread but it is a quite long thread and if there are figures in it I would appreciate a link. I can't see any indication that ODL is profitable still, but would gladly be proven wrong.
  8. This is really good information. Thank you for compiling this! If we could also take the spread for ask and bid in to account for each currency we could calculate an average cost for a transaction of a certain size. (on https://utility-scan.com/#/dashboard it looks like ~USD 20.000 is sent a lot at the moment.
  9. Of course! My source is this article which links to moneygrams Q3 earnings report (here is a free version) were the CFO of moneygram states that moneygram is compensated to bring liquidity to the corridor.
  10. That's because the CEO gets his directions from the owners (i.e. Ripple). In my post history is also a spread comparison between USD/MXN corridor through ODL and regular transactions. There is also evidence that Ripple is paying Moneygram to compensate the losses they make by using ODL. I do believe that ODL could be profitable for remittance companies in the future, but I'm fairly certain that we are not there yet. Now, do you have any evidence that ODL is more cost efficient than regular methods? Please, I would love to see some figures.
  11. There is a reason that Ripple literally had to buy part of moneygram to get them to use ODL. It's not saving Moneygram any money in the corridors current state.
  12. I did some further research and I think most are mistaken on the point the article tries to make about two FX conversions: It is the total spread in the transaction which is the problem. While the end customer - in this case Moneygram as the customer of Ripple - is exposed to very little FX risk when using ODL, someone in the transaction definitely is exposed to FX risk, which is the market maker. The market maker is the person who is providing the ODL to the customer and the one who will be holding the XRP in return for providing the liquidity in the fiat currency. Lets theorise that the market maker is a company. In the end, the company can not pay its employees or its taxes with XRP, but rather it wants to cash out in fiat (this is the current state, lets keep to discussing current circumstances). It will measure its profit in fiat. Hence, holding XRP means FX risk. So why would they want to provide liquidity and hold XRP to begin with? Because it is earning a bit on every transaction. In every fx exchange there is a bid and ask price, and the space between them is the spread. The spread is the hidden commission that the liquidity provider earns on each transaction. As such, the spread is a measure on the level of compensation that the liquidity provider requires to accept the FX-risk (and all other costs associated to the final profit). A spread is an indicator of how effective the process is for the liquidity maker to achieve its final profit. Spread varies a lot between different fiat pairs, for example on one forex trading market i viewed the lowest spread of the listed fiat pairs was for EUR/USD (0,014%), which makes sense since the two financial systems of Europe and USA is heavily linked and the corridors are very efficient. Other smaller currencies have higher spreads, for example USD/TRY (1,50%). Lets calculate the spread you would need to pay comparing Western Union and a USD -> XRP -> MXN conversion. Spread USD/MXN Western Union: Price 1USD/MXN: 19,128 Price MXN/1USD: 19,153 Spread: 0,13% Source Western Union web page. Total spread of 0,13% (but I'm unsure of other fees, alternatively, the spread listed on https://www1.oanda.com/forex-trading/markets/live when i checked it was ~ 0,5%.) Spread USD -> XRP -> MXN: Spread XRP/USD: 0,35% according to https://www.coingecko.com/en/exchanges/bitfinex Spread XRP/MXN: 0,36% according to https://www.coingecko.com/en/exchanges/bitso Total spread: 0,71% So the problem with changing currencies two times is that you are doubly affected by spreads. But this i still only a simplification of the final cost of the transaction since what also matters is depth in liquidity and the amount of slippage depending on what volume of currency you are transacting. This is what ODL is offering to institutions right now, no matter what you believe that ODL might potentially offer in the future.
  13. This is a valid argument. I guess that the theory why the two conversions would be superior to one is that, at scale, the two conversion would be cheaper than one traditional conversion. Partly because the transaction in itself would be more efficient and therefore less costly, but also because XRP could become the central currency towards which all liquidity could be focused and thereby bring down liquidity costs (i.e. instead of having a USD <-> MXN, USD <-> EUR, USD <-> CAD, CAD <-> EUR, CAD <-> MXN, EUR <-> MXN corridor you would have USD/EUR/MXN/CAD <-> XRP, the more currencies you would add to this example the amount of reduced corridors would scale exponentially) . The problem with this argument is that due to today's volatility of XRP/Crypto I would expect market makers to require additional margin compared with fiat currencies. With adoption and scale, the volatility and extra margin required would certainly be reduced. But at the current situation I have a really hard time believing that Moneygram are saving money by using ODL. I'm sure he is right in his observations that Moneygram has eliminated their margin in these corridors and that they are also compensated by Ripple per transaction/volume to use ODL. Hence, ODL is not profitable for institutions in its current state At scale, I believe the benefits of pooling liquidity of each fiat currency towards one intermediary currency on effective rails would definitely be hugely beneficial for the FX market. The big question is if XRP/Ripple will ever reach that scale. Thank you for sharing a well written, well researched and objective article about Moneygram. It was interesting to read.
  14. Yeah it's only a copy of his file, but if you scroll down there are additional graphs.
  15. I promised an update and here it is: https://docs.google.com/spreadsheets/d/1uJuy30O4m9lBzd916G0w-DcG8cB4Snkc5AKEXkQ-S60/edit?usp=sharing, this will not be updated on a frequent basis (by me), but please feel free to copy the document and update it yourselves. All credit to the original creater of the document, https://mobile.twitter.com/LiquidityB, I only altered his graphs. The recent price drop will have implications on LiquidityB's liquidity index going forward (and I think most would agree that the drop is unrelated to any ODL activity), why I would still argue that trailing 30 day volume is a better indicator of ODL activity than the liquidity index. Also added a graph of daily volume which is interesting, even if it is a bit harder to digest.
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