Institutional Onboarding and Counterparty Due Diligence: A Checklist for the Risk Officer

Counterparty diligence on an institutional FX venue is a checklist exercise that most desks treat as a paperwork exercise. The two framings produce different outcomes. The checklist version onboards in two weeks and discovers the gaps during the first stress session; the diligence version onboards in four weeks and knows where the gaps are before the first trade lands.

This post is a working checklist for a risk officer onboarding a new institutional FX counterparty in 2026. It is not exhaustive; it is the set of questions whose answers have, in practice, predicted whether a relationship matures into something usable or remains a name on a panel.

Regulatory standing

• Primary licence: which regulator, which category, which number. Drovix's primary licence is Investment Dealer (Full Service Dealer excluding Underwriting) from the FSC Mauritius under GB21026813. Other tier-1 institutional FX venues hold their primary licence with FCA, CSSF, BaFin, MAS, FINMA, or HKMA. There is no universally 'best' regulator — there is a fit between the regulator's regime and the activity you intend to do.
• Restricted jurisdictions: the explicit list of countries the venue does not accept business from. A venue with a vague answer here is a venue whose compliance is performative. Drovix publishes the list at /restricted; the list is updated on a documented cadence and is enforced at the edge by geolocation.
• Sanctions screening: provider, refresh cadence, escalation path. Drovix uses Refinitiv World-Check with daily refresh and a documented dual-approval path on hits. The right answer for a tier-1 venue is a specific provider name and a specific refresh cadence.
• Source-of-funds documentation: what the venue requires at onboarding and at top-up. Look for a clear schedule rather than 'whatever we feel like asking for'.

Capital and balance sheet

• Reported regulatory capital and the date it was reported. A figure more than 18 months stale is a figure that does not represent the current entity.
• Capital adequacy versus the regulatory minimum. The headline is 'we exceed the minimum'; the diligence question is 'by what multiple'. A multiple under 1.5x is a venue running close to its regulatory limit; a multiple over 3x is a venue with room to absorb a stress event.
• Ownership: who owns the entity, what other regulated businesses they operate, and whether any of those businesses share infrastructure or balance sheet. Drovix is a stand-alone operating entity with its own balance sheet; institutional counterparties are entitled to confirmation that their flow is not subsidising or being subsidised by another business line.

Ownership-structure questions are particularly important when the same group operates a retail brand alongside an institutional one — the structural protection that prevents retail flow from informing the institutional book, and vice versa, is the subject of B-Book to Wholesale.

Funds segregation and protection

• Segregation: are client funds held in segregated accounts, at which bank, with what daily reconciliation, and against what audit. Drovix segregates client funds at named tier-1 banks with daily reconciliation; the bank names are disclosable to a prospective institutional counterparty on request and to a current one on demand.
• Investor compensation: is the venue covered by a compensation scheme. Most institutional venues are not, and the right answer is to confirm this explicitly rather than discover it later. Drovix does NOT participate in an investor compensation scheme; FSC Mauritius licensed entities are outside the FSCS and equivalent schemes by design, and we surface this on /reverse-solicitation.
• Insolvency posture: in the event of the venue's insolvency, what is the legal status of client funds. The answer should reference specific local law and a specific account structure, not a generic 'your funds are safe' statement.

Technology and operational resilience

• Disaster recovery RTO and RPO. Recovery Time Objective: how long is the venue's worst-case time to come back online after a primary-site failure. Recovery Point Objective: how much data, in time terms, is acceptable to lose. A serious venue commits to an RTO in minutes and an RPO of zero or near-zero, with a documented test cadence.
• Cross-region redundancy. Active-active, active-passive, or single-region. An active-active venue can survive a region-level cloud or telecom outage; a single-region venue cannot. The trade-off is operational complexity, and many serious venues legitimately run active-passive — the question is whether the answer is informed.
• Cybersecurity: SOC 2 Type II or ISO 27001 attestation, the most recent audit date, the scope of the audit, and any open findings. 'We take security seriously' is not a sufficient answer in 2026.
• Engineering staffing: the size and tenure of the engineering and SRE team. A venue with three people running production is a venue one resignation away from a degraded service.

The technology layer that the diligence questions are probing is described from the inside in Microseconds Matter (engine, transport, ML pricing) and Market Data Handle Discipline (the data path that determines whether the engine is reading reality).

Execution and pricing transparency

• Last-look policy: is it used, on which order types, with what hold-window distribution, with what rejection symmetry. We covered this exhaustively in the post on last look; the short version is that the answer should be detailed and publishable.
• TCA: what the venue provides by default, what is available on request, and how the reporting interacts with the counterparty's own internal TCA. A venue that does not provide arrival-mid implementation shortfall is providing TCA only to the extent it can avoid the most useful measurement.
• Routing: under what conditions the venue routes externally, to which destinations, with what fee pass-through. A venue that does not route is a venue whose internal price is your floor; whether that is acceptable depends on the size you trade.
• Disclosure of conflicts: which other businesses the venue runs, what data flows between them, and what the operational firewall looks like. A venue that runs a B-book retail operation and an institutional liquidity provision service from the same balance sheet has structural conflicts that the institutional counterparty is entitled to understand.

Operational and onboarding details

• Onboarding timeline: typical wall-clock days from first contact to live trading, conditional on a complete documentation package. The number that matters is the median, not the marketing 'as fast as 24 hours' value.
• Dedicated relationship coverage: named contact, business hours, escalation path. Generic support is acceptable for retail; it is not acceptable for institutional.
• Funding and withdrawal SLAs: standard SWIFT timing, fast-rail options, large-withdrawal procedures. Drovix commits to specific timeframes that are documented in the institutional contract; the document is reviewable before signing.
• Termination terms: in the event the relationship needs to end, what is the procedure for closing positions, repatriating funds, and obtaining historical records. A counterparty that has not thought through termination is one that will discover the answers at the worst possible moment.

Drovix's institutional onboarding

Drovix maintains a public diligence pack covering regulation, capital, segregation, technology, and execution policies. It is available under NDA to prospective institutional counterparties on first contact. The pack is updated quarterly and versioned; the previous version is preserved so a returning counterparty can see what has changed.

Live onboarding for an institutional account, conditional on a complete documentation package on the counterparty side, is typically 10-15 business days. The bottleneck is generally documentation review and named-bank account opening; the technology integration takes 1-3 days for an OMS-vendor pre-certified setup and 5-10 days for a bespoke integration.

Diligence requests, the public pack, and onboarding kickoff all run through

institutional@drovix.com. Live trading begins once both sides have signed the master agreement, the segregated account is funded, and a brief production smoke-test confirms order flow and reporting.

Where to go next

→ The Balance-Sheet Cost of Leverage — the financial layer of counterparty diligence: what the venue's funding stack tells you about how it will behave under stress.

→ Risk Without Friction — the operational layer once the diligence is done and you are live: pre-trade gates, post-trade audit, and the journal that keeps everyone honest.