Eight major firms including banking giants Barclays, Citi, Credit Suisse, JP Morgan and an unnamed tier of FS firm, announced a successful test of a smart contract prototype built by blockchain company Axoni for managing affirmations and post-trade lifecycle processing for OTC (over-the-counter) equity swaps.

According to the official reports, the participating institutions also include IHS Markit, Thomson Reuters and a business consultancy company Capco. The test showed potential efficiency improvements and cost-savings attainable by mark-to-market calculations, margin payments and corporate action processing when carried on a permissioned distributed ledger.

The group established a blockchain trade processing network using locally-installed deployments of Axoni’s proprietary distributed ledger software – Axoni Core. The project evaluated automated lifecycle management and synchronization of a single stock, index, and portfolio swaps. It also tested critical components regarding the deployment and management of the distributed ledger network.

“Complex contracts, a distributed market structure, and replicated workflows across many parties make blockchain technology a natural fit for equity derivatives. Moreover, demonstrating this can be achieved on the same technology also utilized to optimize post-trade asset servicing for credit derivatives further proves the multiplicative value of deploying this infrastructure. It was a pleasure to work with exactly the type of influential and forward-thinking parties required to make this project impactful,” Greg Schvey, CEO of Axoni stated.

The working group additionally conducted more than 50 tests of the underlying Axoni Core infrastructure. The tests include adding and removing permissions for participants, the ability to update the protocol in a simulated live environment, the capacity to process hundreds of messages per second across the distributed network, among others.

“Industry collaboration is the key in driving blockchain innovation and Barclays is keen to remain at the forefront of this,” Richard Evans, Head of Equities for EMEA at Barclays Investment Bank said. “In this project, our investment bank’s Technology teams and CTO Office participated in collaborative testing of equity swaps smart contracts using simulated trades. We look forward to further experimentation and innovation to bring the potential benefits of smart contracts technology to our clients.”

The blockchain project also showed the transparency that could be made available to regulators in real time from systemic risk analytics to individual trade details, at the same time preserving data privacy between trading counterparties.