Post-trade market infrastructure provider DTCC, the Depository Trust & Clearing Corporation and blockchain startup Digital Asset Holdings have announced plans to develop distributed ledger solutions to improve the current process he clearing and settlement of repurchase agreement (repo) transactions.
In a new announcement by DTCC and Digital Asset, the firms will develop and test a distributed ledger or blockchain-based solution to manage the clearing and settlement of U.S. Treasury, Agency and Agency Mortgage-Backed repurchase agreement or repo transactions.
With the endeavor, the firms’ aim is to inherently reduce the risks and capital requirements for the repo market. The process involves enabling DTCC’s Fixed Income Clearing Corporation (FICC) to fundamentally assume the mantle of the settlement counterparty for real-time repo transactions. The change would help with additional netting and offsets.
The proof of concept blockchain is seen as a viable solution for repo agreements due to blockchain’s potential for streamlining the clearing process of repo transactions, while the transactional volume grows in number.
In a statement, DTCC CEO and President, Mike Bodson said:
Distributed ledger technology has the potential to revolutionize certain post-trade processes that are inefficient and complex, and repos are a great place to start. There are absolute opportunities to make clearing in this area much more efficient.
With information sharing capabilities in real-time, a blockchain was the obvious chose as a technology that enabled all parties in a repo trade to view the essential details immediately after a trade is executed. This will further enable buy- and sell-side firms to agree upon repo trade details in a quick, seamless manger while lowering risk and costs.
The agreement will see the two firms develop “structured, cryptographic ledger entries” into the current system of securities trade and settlement flows.
The proof-of-concept project will showcase how participants can create and interact in a common ledger for normal trading just as much as repo agreements.
The first phase of the joint blockchain-for-repo project will commence immediately. It will involve the development of the proof-of-concept solution prior to integrating it with the current DTCC platform. Further development in the future will see collaboration and testing with other market participants to scale blockchain solutions for the industry.
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Last modified (UTC): March 30, 2016 19:53