Wall Street's settling house makes progress with its blockchain tests.
Post-trade market infrastructure provider DTCC, the Depository Trust & Clearing Corporation has announced the competition of the initial phase of its blockchain proof-of-concept trial in the clearing and settlement of repurchase agreement (repo) transactions.
In its announcement yesterday, the DTCC said it successfully completed the first leg of its proof-of-concept test using blockchain technology developed by New York-based industry firm Digital Asset. The test aimed to better manage the netting process for U.S. Treasury and Agency repurchase transactions in order to reduce the risks and capital requirements in the repo market.
Blockchain technology was picked as the viable core solution for repo agreement processing, due to the innovation’s potential for streamlining the clearing process of repurchase transactions while keeping up with growing transaction volumes. As CCN.com reported in March 2016, the Digital Asset-developed blockchain platform was integrated into the DTCC’s platform for testing.
Buying and selling firms can seamless access repo trade details over a blockchain before agreeing upon the trade in a quick manner, ultimately lowering risks and associated costs.
Following the successful ‘phase one’ testing, DTCC president and CEO Michael Bodson stated:
[W]e see this project as another validation of the potential of this exciting, emerging technology. DLT (distributed ledger technology) was chosen because of its real-time information-sharing capabilities, enabling all parties to quickly view repo details after trade execution lowering risks and costs while enabling users to take advantage of the benefits of a central counterparty.
As Wall Street’s settling house the DTCC also has a presence in 16 countries facilitates and oversees over $1 quadrillion annually in clearing and settlement of U.S. securities. The infrastructure provider also processes about 280 million messages a week globally with 40 million open OTC positions at any given time.
With the first leg of testing proving successful, DTCC and Digital Asset will now form a ‘Stakeholder Working Group’ of the big players in the $3 trillion-a-day US repo market to tweak and customize the solution for the industry. Further, the net phase will also scrutinize the blockchain solution to determine if it meets the required performance levels and integration capabilities to connect with member firms.
Digital Asset CEO Blythe Masters added:
As repo volumes continue to grow, Phase Two demonstrates DTCC’s on-going commitment to leveraging DLT for the benefit of their clients, making this one step closer to being a reality.
The PoC trial also sought to prove that a common ledger among participants to interact over normal trading would be possible, just as it would with repo agreements.
DTCC is a notably an investor in Digital Asset, having participated in a $50 million funding round in January 2016.
DTCC’s interest and focus on the innovation is further underlined by chief executive Bodson who previously cited blockchain as a “once-in-a-generation opportunity to modernize the post-trade environment.”
The DTCC has previously tested the technology behind bitcoin for credit default swaps, with successful results revealed in April 2016. In January this year, the DTCC confirmed that it would be using blockchain as the core infrastructure to rebuild its platform that processes $11 trillion in credit default swaps. In this case, DTCC partnered IBM and blockchain development firm Axoni for the solution.
Image from Shutterstock.
Last modified: March 4, 2021 4:54 PM