US post-trade giant DTCC and Digital Asset, the blockchain
firm run by former JP Morgan executive Blythe Masters, have
used distributed ledger technology to manage the netting
process for repo trades.
Both firms announced the successful completion a
proof-of-concept on Monday and will collect feedback from
market participants active in the $3trn per day US repo space
over the coming months.
Repo trades, forms of short-term borrowing for dealers
in government securities, often occur in real time, with the
settlement, clearing and netting processes happening in
DTCC has provided netting services for US Treasury and
agency repos since the mid-90s by combining two or more
obligations to reduce credit and settlement risks.
However, only the "close" leg (the subsequent repurchase) of
same-day settling repos is netted and settled by
DTCC’s Fixed Income Clearing Corporation
DTCC and Digital Asset claim to have demonstrated successful
netting of "start" leg repo trades (the portion of the repo
transaction when the security is sold) using blockchain.
This would allow DTCC to calculate a new net settlement
amount at a point in time and record it in an set, secure and
transparent distributed ledger.
Phase 2 of the overall project, which involves creating a
working group and collecting feedback, is expected to be
completed by June this year.
DTCC will then decide whether to move ahead with the
Any changes to FICC’s repo processing rules are
subject to regulatory approval.
Last month DTCC said it had partnered with IBM and
two other blockchain startups, Axoni and R3,
to rebuild its platform that processes credit default
Digital Asset, led by Blythe Masters, is involved
in multiple blockchain projects and has raised more than $60m
from a group of financial institutions including DTCC, Goldman
Sachs and CME.
The New York-based tech firm currently has
a contract to replace the clearing and settlement systems
of Australian bourse ASX with its blockchain based