For the first time, DekaBank and Metzler Bank have carried out a securities lending transaction without advance collateralization.
The transaction was processed via Deka's digital securities platform SWIAT (Secure Worldwide Interbank Asset Transfer) with technological support from Comyno, a software and consulting company based in Frankfurt/Main, Germany.
SWIAT is blockchain-based and thus enables transactions in real time. If both trading partners are in possession of the securities in question, a “delivery vs. delivery” trade can take place and the usual hedging is no longer necessary. This reduces counterparty risks as well as coordination effort between the trading parties. "For such securities transactions, trade and settlement now fall on almost the same point in time. This poses an enormous advantage over the status quo and points out technical possibilities for the future," explains Andreas Tanneberger, Head of Fixed Income Trading at Metzler Capital Markets.
Securities lending transactions are just the first step. "With the possibility of ´delivery vs. delivery´ trading, the lending market becomes much more attractive for new and existing market players alike," says Michael Cyrus, Head of Money/Forex & Repo/Lending at Deka, who played a key role in developing the platform. "This transaction represents another milestone in the development of a fully digitized, blockchain-based ecosystem for the financial markets."
Transactions in securities and other assets as well as payments can be processed efficiently and cost-effectively using SWIAT. Transfers take place directly between custodian banks without moving securities at CSD account level. This does not require tokenization, nor do the traditional chains of custody at the respective institutions need to be adapted. The Deka platform uses the existing processes and mechanisms of the participating institutions and can be integrated into existing infrastructures. The market initiative launched by Deka is open to additional partners and aims to become the institutional standard for digital settlement. Participating providers of financial services can develop the SWIAT functions further and offer their own services and products on the platform.