The technical set up of a blockchain securities lending solution developed through collaboration between Deutsche Börse Group and HQLAX is near to completion.
The co-operation between the Frankfurt-based financial infrastructure group and HQLAX, which has its office in the Luxembourg House of Financial Technology, was announced in March 2018.
Based on R3 Corda distributed ledger technology (DLT), this securities lending initiative targets efficient collateral management of high-quality liquid assets, helping participants to redistribute liquidity and providing mobility of collateral across locations and systems.
This solution employs tokenised settlement to eliminate the need for actual movement of securities between custody accounts of the transacting counterparties. The underlying securities remain static and off the blockchain.
Access to this securities lending platform is granted via the Eurex Repo trading system. The participants said that a “trusted third-party layer“ provides the interface between the blockchain and legacy securities infrastructure, which leverages “established triparty collateral management services“.
Six banks said they have started onboarding to the platform and this will be completed during the first half of 2019.
Clearstream, Deutsche Börse’s Luxembourg-based post-trade division, will provide custody services, but discussions are “well advanced“ with other custodians to participate.
Deutsche Börse purchased a minority stake in HQLAX in August 2018 and it increased its holding in December 2018.
It has been investing in blockchain technology for more than three years and also has ownership interest in Digital Assets Holdings among a number of other DLT investments.
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