The Depository Trust & Clearing Corporation (DTCC), post-trade market infrastructure for worldwide financial services industry, announced that it has successfully completed a blockchain proof-of-concept that manages netting process for U.S. Treasury and Agency repurchase agreement (repo) transactions.

The PoC tests were done in collaboration with Digital Asset that develops distributed ledger technology (DLT) solutions for financial institutions. Both the companies have demonstrated the successful netting of ‘start leg’ repo transactions for the first time with prior end-of-day net securities obligations in the DTCC environment.

DTCC and Digital Asset have completed the first phase of the blockchain PoC and have progressed to the second phase where they will work together and form a Stakeholder Working Group comprising of leading market participants active in the $3 trillion per day U.S. repo and related transaction market in order to ensure the solution is aligned with industry needs.

“We are very pleased with the results from our repo proof-of-concept effort with Digital Asset, and we see this project as another validation of the potential of this exciting, emerging technology. DLT was chosen because of its real-time information-sharing capabilities, enabling all parties to quickly view repo details after trade execution lowering risks and costs while enabling users to take advantage of the benefits of a central counterparty. Digital Asset has been a strong partner in this work, and we are excited to move to Phase Two with them,” Michael Bodson, President & CEO of DTCC, stated.

The Phase Two tests will make sure whether the solution meets the performance as well as integration needs of DTCC’s technology environment at the same time, allowing integration with member companies. The collaborating companies expect the completion of Phase Two tests by June 2017 at which time DTCC will determine whether to move ahead with the development phase of the effort.

Although DTCC’s Fixed Income Clearing Corporation (FICC) presently allows the matching and verification of repo transactions, only the ‘close leg’ of same-day settling trades is netted. DTCC’s blockchain project solves by netting the ‘start leg’ as well and further reducing settlement risk and costs to members by allowing additional netting and offsets.

“We are delighted to be working with DTCC towards the first industrial-scale implementation of distributed ledger technology for the $3 trillion per day repo market,” Blythe Masters, CEO of Digital Asset, stated. “As repo volumes continue to grow, Phase Two demonstrates DTCC’s on-going commitment to leveraging DLT for the benefit of their clients, making this one step closer to being a reality.”

The blockchain solution will allow DTCC to calculate a new net settlement amount at a point and will record it in an immutable, secure and transparent distributed ledger, which can be leveraged by FICC for new net securities and cash obligations with member companies.