DTCC selects IBM, Axoni and R3 to develop blockchain for derivatives
The Depository Trust & Clearing Corporation (DTCC) has chosen IBM, in partnership with Axoni and R3, to provide a blockchain/distributed ledger technology (DLT) framework to drive improvements in derivatives post-trade lifecycle events.
The firms will work on DTCC’s Trade Information Warehouse (TIW), building a derivatives distributed ledger solution for post-trade processing. The TIW service currently automates the record keeping, lifecycle events, and payment management for more than $11 trillion of cleared and bilateral credit derivatives.
Chris Childs, CEO of DTCC Deriv/SERV says IBM, Axoni and R3 offer “DLT expertise as well as a strong commitment” to the Hyperledger open-source platform and industry standards.
DTCC says the solution will “reduce the cost” of derivatives processing by “eliminating the need for disjointed, redundant processing capabilities and the associated reconciliation costs”.
The solution has been developed with input and guidance from a number of market participants including Barclays, Citi, Credit Suisse, Deutsche Bank, JP Morgan, UBS and Wells Fargo, and market infrastructure providers, IHS Markit and Intercontinental Exchange.
Under the agreement, IBM will lead the initiative, provide programme management, DLT expertise, and integration services, and offer the solution-as-a-service. Axoni will provide distributed ledger infrastructure and smart contract applications, with R3 acting as a solution advisor.
Development is expected to begin this month, and build on Axoni’s AxCore distributed ledger protocol which will be submitted to Hyperledger when the solution goes live, anticipated in early 2018.
DTCC says its latest announcement follows the “successful” completion of a proof-of-concept (POC) for North American single name credit default swaps (CDS) last year with Axoni, IHS Markit and several market participants. The POC demonstrated that “complex” post-trade events inherent to CDS can be “managed efficiently” with distributed ledger technology in a permissioned, distributed, peer-to-peer network.