Broadridge has launched a new trading platform based on distributed ledger technology (DLT) which provides a single platform where market participants can agree, execute and settle repo transactions.
The distributed ledger repo (DLR) platform builds on the success of multiple pilots with buy and sellside firms, including Natixis and Societe Generale, and will enable firms to agree, execute and settle repo transactions on a decentralised platform.
The DLR allows for the immobilisation of the underlying securities in the repo transactions, while transferring ownership via smart contracts executed on the platform.
The benefits are not only a reduction in operating costs but also the risk of all repo activity, including intraday, overnight and term repos, both on a bilateral and an intracompany basis.
It also lowers counterparty risk while increasing auditability.
In the first week since launch, DLR has executed $31 bn in average daily volume
Built on Broadridge’s fixed income trade processing platform, the DLR solution leverages Daml smart contracts from Digital Asset as well as VMware Blockchain, a scalable distributed ledger platform.
DLR provides a secure record of repo trade details, reducing the need for reconciliation and removing obstacles to straight-through-processing.
“This is the first step in the transformation of the $10 trn global bilateral repo market using smart contracts and distributed ledger technology,” said Vijay Mayadas, President of Capital Markets at Broadridge.
He added, “Co-innovating with market participants, we are able to bring solutions to our network of clients that create the next level of operational efficiencies. Within the repo market, distributed ledger technology and smart contracts have shown that they can play an instrumental role in driving efficiencies, reducing risk and enhancing liquidity while leveraging the existing legal and account frameworks.”
Aite Group senior analyst Vinod Jain says, “By coupling emerging technologies like distributed ledger technology and smart contracts with existing operational account structure functionality, Broadridge has enabled real-time securities mobility in the repo market. This is a powerful value proposition for firms, especially those looking to reduce risk and enhance operational efficiencies.”
There have been other initiatives in the blockchain space to improve the repo trading infrastructure.
In December, JP Morgan completed an intraday repo transaction using its custom-built blockchain platform Onyx.
The US bank tested its viability by conducting trades between two of its affiliates, alongside successful simulations of trades with Goldman Sachs and other entities, with BNY Mellon as the triparty agent.
©Markets Media Europe 2021