Deutsche Börse and HQLAx to build securities lending solution on R3 Corda blockchain
Via Corda, they will build an integrated front-to-back operating model to facilitate “more efficient” collateral management of high quality liquid assets.
The duo say these assets are in heightened demand due to the implementation of bank regulations for liquidity, mandatory clearing and margin requirements for OTC derivatives.
Deutsche Börse cites the most recent Basel III Monitoring Report, which states that the global banking industry reported holdings of €11.95 trillion of high quality liquid assets.
Philippe Seyll, executive manager at Deutsche Börse, says it is “embracing distributed ledger technology [DLT] and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents”.
The trading layer will be delivered exclusively by Deutsche Börse’s Eurex Repo platform, which will enable market participants to use existing connectivity to the Repo service.
According to Deutsche Börse, in a traditional settlement of a securities lending transaction, underlying securities are transferred between custody accounts.
In the HQLAx operating model, legal title transfer of baskets of securities will be achieved by the transfer of ownership of HQLAx digital collateral records (DCRs) while the underlying securities remain static within unique DCR-linked custody accounts.
The use of DCRs to effect transfers of securities will “enhance regulatory transparency” and “mitigate systemic risk”.
Deutsche Börse says this latest development brings the collateral lending solution “one step closer to production”.
HQLAx and R3 were also involved in a separate deal. At the start of this month, Credit Suisse and ING executed the first live transaction using HQLAx’s securities lending app on Corda.