DTCC partners with IBM, Axoni and R3 to clear derivatives with blockchain

FinTech | January 10, 2017 By:

The Depository Trust & Clearing Corporation (DTCC), the central bookkeeper for Wall Street’s securities trades, announced that it has selected IBM, Axoni and R3 to create a blockchain framework to improve the derivatives post-trade lifecycle.

The firms will work collaboratively to re-platform DTCC’s Trade Information Warehouse, working collaboratively to build 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.

“There’s been a lot of hype in the last year and a half about blockchain and distributed ledger technology and how it will revolutionize the financial markets and change the post-trade processing and whatnot,” said DTCC chief executive officer Michael Bodson, “but there’s been no major practical rollout of scale based upon this technology. This will be one of the first globally where we are using distributed ledger technology to become a piece of the infrastructure in a very critical market, in the credit default swaps market, and use it across the entirety of multiple players.”

The new solution will enable DTCC and its clients to further streamline, automate and reduce the cost of derivatives processing across the industry by eliminating the need for disjointed, redundant processing capabilities and the associated reconciliation costs, the statement said. It has been developed with input and guidance from a number of market participants including Barclays, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS and Wells Fargo, IHS Markit and Intercontinental Exchange.

Development is expected to begin in January 2017 and build on Axoni’s AxCore distributed ledger protocol. It is expected to go live by early 2018 and will be released to open-source collaboration project Hyperledger at that point.