Axoni and 11 firms announced today the successful completion of a pilot to manage equity swap transactions and related post-trade lifecycle events. The implementation employs blockchain smart contracts and uses an optimized data structure in a distributed, Peer to Peer network to ensure perpetual reconciliation.
A continuation of an initial proof of concept, the pilot expanded the blockchain network to process equity swap lifecycle events, end-to-end. Having both sides of a swap transaction on the same ledger allows counterparties to simultaneously view and share data during the entire lifecycle of the swap – from proposal to termination.
This synchronization of data, increased transparency of calculation logic, and automation of corporate actions processing will reduce operational costs and errors and allow real-time data access for both client and regulatory reporting.
The pilot was managed by Axoni and executed on AxCore, Axoni’s distributed ledger software. The broad participant group included seven swap market participants from both the sell-side and buy-side including: BNP Paribas, Citi, Credit Suisse, Canada Pension Plan Investment Board, Goldman Sachs, J.P. Morgan as well as industry service providers IHS Markit and Thomson Reuters provided equity derivatives documentation expertise and Capco provided consulting services.
Over the course of the multi-month pilot, the project tested automated lifecycle management and synchronization of single stock and portfolio total return swaps, as well as critical components regarding the deployment and management of the distributed ledger network.
As part of the initiative, Axoni, assisted by ISDA, used participating firm’s confirmation templates to create a standardized equity swap confirmation and trade template based on a 2011 ISDA Equity Derivatives Definitions framework designed to facilitate electronic processing of equity derivatives. This standardized data structure was then implemented on the blockchain network and used in the pilot.