EXCLUSIVE: HQLAᵡ securities lending blockchain solution passes transaction tests
24 September 2019 Luxembourg
Image: Shutterstock
HQLAᵡ has successfully facilitated several securities transactions by global banks through its blockchain securities lending solution, ahead of its November launch date.
The HQLAᵡ platform for collateral swaps leverages R3’s distributed ledger technology, Corda, to provide liquidity and collateral management solutions for institutional clients in the global securities financing markets.
The solution is being jointly developed with Deutsche Boerse Group.
The simulated transactions involved the ownership of baskets of securities residing at Clearstream Banking SA and Euroclear Bank being exchanged without the need for them to be moved across the Bridge, the electronic communications platform normally needed to transmit securities.
Commerzbank and ING were among the market participants that tested the front-to-back trade flow across the multiple layers of the HQLAᵡ operating model.
Guido Stroemer, CEO of HQLAᵡ, said: “The successful execution of these simulation transactions is particularly important because they test the front-to-back trade flow across the four layers of the HQLAᵡ operating model.”
“As such, the simulation transactions are a key milestone in our client on-boarding journey.”
The four-layer model aims to facilitate more efficient collateral management of high-quality liquid assets, which are in heightened demand due to increased clearing and margin requirements of Basel III, among other regulations.
Layer one, which is built on Corda, is the digital collateral registry that enables delivery-versus-delivery ownership transfers of baskets of securities. HQLAᵡ explained that this eliminates the operationally onerous requirement to move securities across fragmented securities settlement systems.
The other layers are: the Eurex Repo F7-trading system, where transactions are executed; the participating custodians/triparty agents, where the securities are deposited; and the Deutsche Boerse Group-owned Trusted Third Party (TTP) entity, which links the custodians/triparty agents to the digital collateral registry.
The TTP acts as an interface between the HQLAᵡ digital collateral registry and existing securities settlement infrastructures.
J.P. Morgan is currently being on-boarded to the TTP as a collateral receiver and collateral account owner, in the J.P. Morgan triparty programme.
In May, the TTP also became a client of Euroclear as a collateral taker on the triparty platform.
Speaking at the 2019 Securities Finance Technology Symposium, Stroemer said that the link with Euroclear represented an important step for enabling Euroclear clients to mobilise collateral on the HQLAᵡ platform.
Stroemer added that the TTP will become a collateral receiver at each of the major triparty agents in Europe.
As of September, HQLAᵡ has confirmed that “advanced discussions are underway with additional leading custodians and triparty agents”.
Ahead of the platform’s November launch, HQLAᵡ and Deutsche Boerse Group say they are continuing to actively on-board additional market participants.
HQLAᵡ was unable to comment on how many market participants it expects to be live on the platform when it goes live.
The HQLAᵡ platform for collateral swaps leverages R3’s distributed ledger technology, Corda, to provide liquidity and collateral management solutions for institutional clients in the global securities financing markets.
The solution is being jointly developed with Deutsche Boerse Group.
The simulated transactions involved the ownership of baskets of securities residing at Clearstream Banking SA and Euroclear Bank being exchanged without the need for them to be moved across the Bridge, the electronic communications platform normally needed to transmit securities.
Commerzbank and ING were among the market participants that tested the front-to-back trade flow across the multiple layers of the HQLAᵡ operating model.
Guido Stroemer, CEO of HQLAᵡ, said: “The successful execution of these simulation transactions is particularly important because they test the front-to-back trade flow across the four layers of the HQLAᵡ operating model.”
“As such, the simulation transactions are a key milestone in our client on-boarding journey.”
The four-layer model aims to facilitate more efficient collateral management of high-quality liquid assets, which are in heightened demand due to increased clearing and margin requirements of Basel III, among other regulations.
Layer one, which is built on Corda, is the digital collateral registry that enables delivery-versus-delivery ownership transfers of baskets of securities. HQLAᵡ explained that this eliminates the operationally onerous requirement to move securities across fragmented securities settlement systems.
The other layers are: the Eurex Repo F7-trading system, where transactions are executed; the participating custodians/triparty agents, where the securities are deposited; and the Deutsche Boerse Group-owned Trusted Third Party (TTP) entity, which links the custodians/triparty agents to the digital collateral registry.
The TTP acts as an interface between the HQLAᵡ digital collateral registry and existing securities settlement infrastructures.
J.P. Morgan is currently being on-boarded to the TTP as a collateral receiver and collateral account owner, in the J.P. Morgan triparty programme.
In May, the TTP also became a client of Euroclear as a collateral taker on the triparty platform.
Speaking at the 2019 Securities Finance Technology Symposium, Stroemer said that the link with Euroclear represented an important step for enabling Euroclear clients to mobilise collateral on the HQLAᵡ platform.
Stroemer added that the TTP will become a collateral receiver at each of the major triparty agents in Europe.
As of September, HQLAᵡ has confirmed that “advanced discussions are underway with additional leading custodians and triparty agents”.
Ahead of the platform’s November launch, HQLAᵡ and Deutsche Boerse Group say they are continuing to actively on-board additional market participants.
HQLAᵡ was unable to comment on how many market participants it expects to be live on the platform when it goes live.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
