IBM, R3, Axoni to develop blockchain solution for derivatives processing for DTCC
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, announced in a press release sent to CoinReport that it has selected IBM, Axoni and R3 to get a blockchain or distributed ledger technology (BCT or DLT, respectively) framework from to drive additional improvements in derivatives post-trade lifecycle events.
The companies, said the release, will work together to re-platform the Trade Information Warehouse (“TIW”) of the DTCC, creating a derivatives blockchain solution for post-trade processing based on current TIW interfaces and capabilities with market participants and technology providers. The TIW service currently automates the payment management, lifecycle events and record keeping for over $11 trillion of cleared and bilateral credit derivatives.
Thanks to the solution, DTCC clients will be able to further automate, streamline and cut the cost of derivatives processing throughout the industry by abolishing the requirement for disjointed, extra processing capabilities and reconciliation expenditures.
Several market participants including Citi, Wells Fargo, Barclays, J.P. Morgan, UBS and Credit Suisse and important market infrastructure providers Intercontinental Exchange and HIS Markit provided input and guidance for the development of the solution.
An end-state vision of the solution, which will be deployed through several phases, will create permissioned blockchain network for derivatives, governed by industry-owned DTCC, with peer nodes at participating companies.
Under the agreement, IBM will lead the enterprise, deliver program management, DLT proficiency and integration services and offer the solution-as-a-service; Axoni will deliver blockchain infrastructure and smart contract applications and R3 will act as a solution advisor.
Development is projected to commence in January 2017 and exploit Axoni’s AxCore blockchain protocol, which will be submitted to Hyperledger when the solution goes live, expected in early 2018. Hyperledger is an open source collaborative project hosted by the Linux Foundation.
DTCC Deriv/SERV CEO Chris Childs said in the press release, “IBM, Axoni and R3 offer valued DLT expertise as well as a strong commitment to the Hyperledger community and industry standards. We are pleased that they have chosen to leverage their collective expertise and collaborate with us on this initiative, which will allow us to build the best solution for the marketplace while minimizing cost to the industry and expediting our speed to market.”
IBM Industry Platforms senior vice president Bridget Van Kralingen said on the occasion, “As one of the largest and most groundbreaking distributed ledger projects to date in the financial services industry, DTCC together with its member banks are reimagining the credit derivatives process. The combined expertise of IBM and our partners enables us to provide DTCC with a resilient, open and innovative new technology platform to support this groundbreaking opportunity.”
Axoni CEO Greg Schvey stated, “Deploying distributed ledger technology in production at this scale is a watershed moment for the industry. The combination of technology and business expertise being contributed to this project from across the participating firms is unparalleled and the benefits are clear. We look forward to working with DTCC and the project partners to bring those benefits to the market.”
David Rutter, CEO of R3, said, “We’re very excited to be working with this team, as DTCC seeks to enhance its derivatives processing technology. Distributed ledger technology is a natural fit for derivatives processing. By recording and automatically managing shared records of financial agreements in the cloud without error, it can minimize the steps required for post-trade processing and free up middle and back office staff from the onerous task of reconciliation.”
Last year, a proof-of-concept (POC) for North American single name Credit Default Swaps (CDS) was successfully completed with DTCC, IHS Markit, Axoni and a number of market participants, with the POC demonstrating the efficient management of complex post-trade events inherent to CDS with blockchain technology in a permissioned, distributed, peer-to-peer network.
Other than this enterprise, DTCC said in the release that it is pursuing more POCs and prospects for utilizing DLT to further improve the post-trade process.
Featured image – Via DTTC.com’s Press Room
IBM logo – PRNewsFoto/IBM Corporation
Bridget van Kralingen’s photo – Via IBM.com’s Press Room