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Major Clearing Houses of derivatives trades ready with proof of concept to deploy Blockchain to improvise trade solutions
Now, the dealing into the securities in a more efficient manner when used to cover margin calls, including after business hours, with the help of deployment of Blockchain or DLT (distributed ledger technology) system, as the predominant global houses, such as, ABN AMRO Clearing, EuroCCP, Euroclear and NASDAQ have entered into the pact and finalised a joint proof of concept to make this improvement possible.
The underlying collateral transfers used to be processed by Euroclear’s Central Securities Depository, ensuring settlement finality and regulatory compliance. While NASDAQ developed the proof of concept for the DLT nodes while ABN AMRO Clearing, EuroCCP and Nasdaq Clearing developed a specific front-end and managed integration into their own environments.
Coen van Walbeek, Global Head of Treasury and SBL at ABN AMRO Clearing mentioned: “With a faster and more globalized market, it is essential to make the processing of collateral more efficient. Expanding the possibilities to use securities as collateral will make clearing through CCPs more attractive and cheaper for buy-side market participants. This is a breakthrough for the CCP model.”
ABN AMRO Clearing has been the leading global providers of clearing and financing services especially for listed derivatives and cash securities, warrants, commodities, FX and OTC products. With global presence employing huge employee staff, ABN AMRO Clearing renders services to clients over 160 exchanges, MTFs and FX liquidity centers and consistently ranks as a top 3 clearer in most time zones.
The latest development on Blockchain deployment solution likely to tackle potential business challenges efficiently and handle smartly the incompetence in the current collateral system to Central Counterparties (CCPs), resilient and robust network would be fabricated between parties involved in the collateral transactions.
Any technical glitches and obstacles of collateral processing that result in inefficiency due to the latest market modifications like stretch trading hours by stock exchanges and the requirement to centrally clear derivatives traded bilaterally (OTC) under the European Market Infrastructure Regulation (EMIR) would be sensitized and handled effectively.
When it comes to Cryptocurrency Avenue, there are, according to price tracking website coinmarketcap.com, currently 1,627 different cryptocurrencies, with a combined worth of more than $286 billion. Of this, just over $12 billion was traded in the last 24 hours. So, ensuring the smooth flow of liquidity is the biggest challenge.
As the buy-side market participation noticed to be increased, the central clearance of such derivatives trades, ensuring efficient securities collateral solution has become essential. Hence, deploying the solution developed in the proof of concept, parties have been able to deal the margin calls, transact the collateral trades and the return process swiftly. Clearing participants and CCPs were able to optimize their collateral positions through a collateral dashboard.
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