Foreign exchange (FX) markets see a transaction volume of over $2 trillion per day. A number of standard ways of conducting business have been developed in the FX indus- try. However, current FX specifications are informal and their business semantics unclear. The resulting implemen- tations tend to be complex and compliance with the stan- dards unverifiable. This results in potential loss of value due to incompatible business processes and possible trades not consummated.

This paper validates a formal, protocol-based approach by specifying foreign exchange processes as standardized by the TWIST consortium. The proposed approach formal- izes a small, core set of foreign exchange interaction pro- tocols on which the desired processes can be based. The core protocols can be composed to yield a large variety of possible processes. Each protocol is rigorously defined in terms of the commitments undertaken and manipulated by the parties involved. By contrast, traditional approaches as used in the current TWIST specification lead to redundancy in specification and difficulty in understanding the import of the interactions involved. In addition, our approach dis- covered interesting business scenarios that traditional ap- proaches would have missed.