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DTCC picks IBM, Axoni and R3 to develop blockchain solution for derivatives processing
The Depository Trust & Clearing Corporation (DTCC) has selected IBM, in partnership with Axoni and R3, to provide a distributed ledger technology (DLT) framework to drive further improvements in derivatives post-trade lifecycle events.
According to the official release, the firms will collaborate to re-platform DTCC’s Trade Information Warehouse (TIW), building a derivatives distributed ledger solution for post-trade processing based on existing TIW capabilities and interfaces with technology providers and market participants. The TIW service currently automates the record keeping, lifecycle events, and payment management for more than $11 trillion of cleared and bilateral credit derivatives.
By eliminating the need for disjointed, redundant processing capabilities and the associated reconciliation costs, the solution will enable DTCC and its clients to further streamline, automate and reduce the cost of derivatives processing across the industry. The solution has been developed with inputs from a number of market participants including Barclays, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS and Wells Fargo, and key market infrastructure providers, IHS Markit and Intercontinental Exchange. It will be deployed through a number of phases, with an end-state vision to establish a permissioned distributed ledger network for derivatives, governed by industry-owned DTCC, with peer nodes at participating firms.
Under the agreement, IBM will lead the initiative, provide program management, DLT expertise, and integration services, and offer the solution-as-a-service. Axoni will provide distributed ledger infrastructure and smart contract applications, with R3 acting as a solution advisor.
“As one of the largest and most groundbreaking distributed ledger projects to date in the financial services industry, DTCC together with its member banks are reimagining the credit derivatives process. The combined expertise of IBM and our partners enables us to provide DTCC with a resilient, open and innovative new technology platform to support this groundbreaking opportunity”, Bridget Van Kralingen, Senior Vice President, IBM Industry Platforms, said.
Development is expected to begin in January 2017 and build on Axoni’s AxCore distributed ledger protocol which will be submitted to Hyperledger when the solution goes live, anticipated in early 2018. Hyperledger is an open source collaboration project hosted by the Linux Foundation.
“IBM, Axoni and R3 offer valued DLT expertise as well as a strong commitment to the Hyperledger community and industry standards. We are pleased that they have chosen to leverage their collective expertise and collaborate with us on this initiative, which will allow us to build the best solution for the marketplace while minimizing cost to the industry and expediting our speed to market”, Chris Childs, CEO of DTCC Deriv/SERV said.
This announcement follows the successful completion of a proof-of-concept (POC) for North American single name Credit Default Swaps (CDS) last year with DTCC, Axoni, IHS Markit and several market participants. The POC demonstrated that complex post-trade events inherent to CDS can be managed efficiently with distributed ledger technology in a permissioned, distributed, peer-to-peer network.
In addition to this initiative, DTCC is pursuing additional POCs and opportunities for leveraging DLT to further enhance the post-trade process.
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