Deutsche Börse buys stake in HQLAx to pursue blockchain-based securities lending

Deutsche Börse buys stake in HQLAx to pursue blockchain-based securities lending

Deutsche Börse has acquired a minority stake in HQLAx, the liquidity and collateral management outfit with which it is building a blockchain-based front-to-back operating model for securities lending.

The "single-digit euro million" investment is likely to be followed up by another before the end of the year, says the German exchange operator, which will also take two HQLAx board seats.

The deal comes five months after the two firms revealed that they are working together to use the R3 Corda blockchain platform to tackle the fragmentation of the securities lending market.

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

So far, the initiative has already seen the beginning of the on-boarding process with an initial set of banks, while discussions with relevant regulatory authorities are also taking place.

Philippe Seyll, co-CEO, Clearstream Banking, says: "Together with like-minded partners such as HQLAx we want to create a standardised lending marketplace. It will allow market participants to redistribute collateral liquidity more efficiently by improving interoperability for pools of securities residing in multiple, disparate settlement systems and locations."

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