Colombia bourse to use blockchain for OTC derivatives collateral
The Colombian Stock Exchange (bvc) and Framework Contract, a fintech, have teamed up to promote the Colibrí platform, which uses blockchain technology to improve operational efficiency in the exchange of guarantees in OTC derivatives operations.
The Colibrí platform uses blockchain technology to develop an end-to-end operating model to facilitate more efficient collateral exchange in OTC derivatives operations, while guarantees remain in custody of a supervised entity, such as the clearinghouse or custodians.
The announcement comes ahead of derivatives markets regulations beginning in 2021 that are expected to help financial institutions and companies access derivatives with better prices and longer terms. Currently the exchange of collateral in off-exchange derivatives transactions involves a series of time-consuming manual processes that can be expensive and difficult to reconcile.
The technology of shared digital records (aka distributed ledger technology) or blockchain allows new ways of sharing data and full automation of data financial and accounting processes, increasing productivity, reducing time and risks for the parties to an OTC derivatives transaction. The standardized nature of flows, contracts and collateral administration practices in the derivatives trading over the counter makes this an ideal test case to demonstrate its effectiveness.
bvc and Framework Contract will now work together on a roadmap towards implementation of blockchain technology in capital markets. As part of the agreement, bvc will join the Colibrí Consortium, which includes firms like Bancolombia, Banco BBVA, Fiduciaria Bancolombia, Santander CACEIS Colombia, the clearinghouse Deceval, and Sophos Solutions, among others.
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