Deutsche Börse, a German marketplace for securities trading, in collaboration with liquidity and collateral management outfit HQLAx and blockchain consortium R3 have agreed to create a front-to-back operating model for securities lending.
The Deutsche Börse securities lending solution, aims to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the world.
Using Corda’s blockchain technology, the partners will build a fully integrated front to back operating model to facilitate more efficient collateral management of high quality liquid assets. These assets are in heightened demand due to the implementation of bank regulations for liquidity, mandatory clearing and margin requirements for OTC derivatives.
Currently, the global banking industry holds €11.95 trillion of such assets, as per Basel III Monitoring Report.
The trading layer will be delivered exclusively by Deutsche Börse’s Eurex Repo platform, which will enable market participants to leverage existing connectivity to the market-leading Eurex Repo service. Deutsche Börse Group will in addition assume a lead role in the custody agnostic, post-trade processing layer, which is designed to interoperate with multiple collateral agents and custodians.
The partnership with Deutsche Börse is expected to foster market adoption by enabling seamless connectivity with HQLAX, for both trade execution and post-trade processing.
According to Philippe Seyll, the Executive Manager at Deutsche Börse Group, the collaboration between the German securities trading exchange and HQLAx will be able to: “address some of the major issues in today’s securities lending markets through innovate means.”
“With the creation of a neutral custody agnostic control layer, Deutsche Börse is embracing distributed ledger technology and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents. This way Deutsche Börse supports market participants to deal with the global regulatory framework whilst reaping the benefits of the leading edge distributed ledger technology.”
Guido Stroemer, CEO of HQLAX, commented: “Our goal is to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the globe. Partnering with Deutsche Börse Group enables us to maximise the network effect that will drive widespread adoption of the HQLAX platform. We look forward to further collaboration with the broader community of collateral agents and custodians.”
David Rutter, CEO of R3, added: “Partnering with a market leader like Deutsche Börse Group is a major milestone for HQLAX, and Corda is the perfect choice of platform. It was built from the ground up to enable businesses in complex and often highly regulated markets to overcome real-world challenges like this those associated with securities lending.”
HQLAx has form in this regard. Earlier this month, Credit Suisse and ING were the first to execute a live collateral swap with full legal exchange of contracts and settlement using an R3 Corda-based collateral lending application developed by HQLAx.