Blockchain rising

Blockchain rising

R3 and four Japanese financial institutions (FIs) have joined forces to use blockchain in a derivatives prototype test.

Nomura, Daiwa Securities Group, Mizuho, Sumitomo Mitsui Banking Corporation and R3 have tested a prototype developed using Corda, R3’s distributed ledger technology (DLT) platform based on blockchain, to streamline International Swaps and Derivatives Association (ISDA) Master Agreement negotiations.

When signing this agreement, a standard document published by ISDA to govern over-the-counter derivatives transactions, FIs are typically required to co-ordinate with various functions internally while negotiating the contract terms with an external counterparty. Both processes are generally conducted through e-mails, which must be recorded and stored, “creating a large amount of data that each firm needs to manage”.

As part of their plan to streamline the process, the prototype has been designed to remove the use of e-mails, while ensuring agreed terms and conditions can be recorded and stored on the DLT platform in chronological order.

The use of the Corda technology is “expected to enhance transparency and reduce the efforts in storing and managing all relevant data, which would help facilitate the negotiating process”.

Following the “successful completion” of the prototype test, the group plans to identify other areas where this technology can be applied, such as other contract negotiation processes and product development.

Last week, R3 completed the first two of three tranches in its Series A fundraising round, securing $107 million in the “world’s largest DLT investment to date”.