OCBC enables institutional intraday lending through blockchain
01 November 2024 Singapore
Image: fotomek/stock.adobe.com
The Oversea-Chinese Banking Corporation (OCBC) has implemented blockchain technology to provide intraday institutional lending capabilities.
The Singapore-based bank completed the achievement through reverse repos on J.P. Morgan’s Digital Financing application, built on the Onyx Digital Assets platform, where OCBC lends cash to J.P. Morgan and accepts tokenised securities as collateral.
Such transactions can be completed within the day, as the exchange of cash and tokenised securities through the blockchain is nearly instantaneous, OCBC explains.
In contrast, the exchange of cash and collateral typically takes at least one business day in the traditional repo market due to manual processes.
OCBC says it is the first Singapore bank with intraday institutional lending capabilities, as well as the first J.P. Morgan’s external counterparty with the ability to execute reverse repos.
“Collaborating with J.P. Morgan’s Digital Financing for intraday repo provides OCBC with a powerful tool for intraday borrowing and lending of cash by harnessing blockchain technology," says Kenneth Lai, head of global markets at OCBC.
“This improves our liquidity management resilience and allows us to put excess intraday liquidity to work. I envision that markets will only get more competitive and sophisticated, so the ability to optimise liquidity on an intraday basis to maximise returns can be a game changer.”
OCBC completed its first reverse repo on Digital Financing on 11 October, with a maturity of less than two hours.
The principal cash amount was returned to OCBC together with interest, and OCBC released the tokenised securities back to J.P. Morgan.
In addition to the reverse repo, OCBC also executed a separate intraday repo as a cash borrower on the same day.
Although both transactions were denominated in US dollars, euro-denominated transactions are also available on Digital Financing.
Euroclear’s triparty service facilitated the securities tokenisation process for the pair of transactions.
"The leveraging of blockchain technology marks a pioneering step towards faster, more resilient financial transactions, transforming how cash and collateral can be managed,” says Olivier Grimonpont, head of product management, market liquidity, at Euroclear.
“This initiative sets a powerful example for the industry, highlighting how intraday liquidity can be optimised effectively to deliver intrinsic value."
The number of intraday repos on Digital Financing has surpassed 1,200 — totalling more than US$1.5 trillion — over the last four years, according to OCBC.
As many as 10 clients across Asia, North America, and Europe have executed intraday repos on Digital Financing so far, and J.P. Morgan expects to see more of such transactions in the future, as participants become more comfortable with this new technology.
Scott Lucas, head of markets distributed ledger technology at J.P. Morgan, comments: “We are pleased to collaborate with OCBC in demonstrating the ability and interest for lenders to participate in an intraday liquidity market. We are looking forward to further growth in this type of transaction.”
The Singapore-based bank completed the achievement through reverse repos on J.P. Morgan’s Digital Financing application, built on the Onyx Digital Assets platform, where OCBC lends cash to J.P. Morgan and accepts tokenised securities as collateral.
Such transactions can be completed within the day, as the exchange of cash and tokenised securities through the blockchain is nearly instantaneous, OCBC explains.
In contrast, the exchange of cash and collateral typically takes at least one business day in the traditional repo market due to manual processes.
OCBC says it is the first Singapore bank with intraday institutional lending capabilities, as well as the first J.P. Morgan’s external counterparty with the ability to execute reverse repos.
“Collaborating with J.P. Morgan’s Digital Financing for intraday repo provides OCBC with a powerful tool for intraday borrowing and lending of cash by harnessing blockchain technology," says Kenneth Lai, head of global markets at OCBC.
“This improves our liquidity management resilience and allows us to put excess intraday liquidity to work. I envision that markets will only get more competitive and sophisticated, so the ability to optimise liquidity on an intraday basis to maximise returns can be a game changer.”
OCBC completed its first reverse repo on Digital Financing on 11 October, with a maturity of less than two hours.
The principal cash amount was returned to OCBC together with interest, and OCBC released the tokenised securities back to J.P. Morgan.
In addition to the reverse repo, OCBC also executed a separate intraday repo as a cash borrower on the same day.
Although both transactions were denominated in US dollars, euro-denominated transactions are also available on Digital Financing.
Euroclear’s triparty service facilitated the securities tokenisation process for the pair of transactions.
"The leveraging of blockchain technology marks a pioneering step towards faster, more resilient financial transactions, transforming how cash and collateral can be managed,” says Olivier Grimonpont, head of product management, market liquidity, at Euroclear.
“This initiative sets a powerful example for the industry, highlighting how intraday liquidity can be optimised effectively to deliver intrinsic value."
The number of intraday repos on Digital Financing has surpassed 1,200 — totalling more than US$1.5 trillion — over the last four years, according to OCBC.
As many as 10 clients across Asia, North America, and Europe have executed intraday repos on Digital Financing so far, and J.P. Morgan expects to see more of such transactions in the future, as participants become more comfortable with this new technology.
Scott Lucas, head of markets distributed ledger technology at J.P. Morgan, comments: “We are pleased to collaborate with OCBC in demonstrating the ability and interest for lenders to participate in an intraday liquidity market. We are looking forward to further growth in this type of transaction.”
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