Deutsche Börse is to work with liquidity and collateral management outfit HQLAx and blockchain consortium R3 to create a front-to-back operating model for securities lending.
Under the programme, Eurex will provide the Repo trading application, while Deutsche Börse will offer a post-trade processing layer which will interoperate with multiple collateral agents and custodians.
In a traditional settlement of a securities lending transaction, individual underlying securities are transferred between accounts. However, the intent of the operating model for the HQLAXx collateral lending application is to achieve a legal title transfer of baskets of securities through the transfer of ownership of Digital Collateral Records of the underlying securities. The goal is to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the globe
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.
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.
Philippe Seyll, executive manager at Deutsche Börse, comments: “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.”