The DLT-based system for frictionless collateral swaps was carried out on the Eurex Repo F7-trading system.

The transaction entailed the exchange of a basket of corporate bonds and German government bonds between UBS and Commerzbank both using Clearstream Banking as custodian.

This was followed by a cross-custodian swap between UBS and Credit Suisse, in which ownership of corporate bonds at Clearstream Banking and German government bonds at Euroclear Bank were exchanged without the need for securities to be physically moved between the collateral agents. The change in ownership was instead recorded on HQLAx's digital collateral registry.

Peter Schmidt, co-head, Repo Desk Treasury at Commerzbank, states: “HQLAx delivers a fascinating approach to overcome the fragmented post-trading landscape. It enables treasury departments to manage their collateral pools more efficiently by significantly reducing the settlement cycle and avoiding resource-intensive collateral movements. It is a first but important step toward a new ecosystem where tokenised assets can be traded in a DLT environment.”

In addition to Commerzbank, Credit Suisse and UBS, over 15 market participants, including CIBC, Citi, Goldman Sachs and ING, are currently engaged in different phases of onboarding to the HQLAx platform. Meanwhile, JPMorgan is in the process of becoming the third tri-party agent in the HQLAx operating model, alongside Clearstream Banking. and Euroclear Bank.

“The go-live of the HQLAx operating model demonstrates the power of innovation that DLT is already bringing to the financial services industry,” says Jens Hachmeister, head of new markets at Deutsche Börse. “It proves how new technology can successfully be combined with trusted market infrastructure - and the positive reception of the model in the market speaks for itself. We look forward to continuing our fruitful collaboration with HQLAx.”