J.P. Morgan announced today it completed a live, blockchain-based intraday repo transaction. The transaction was successfully conducted between J.P. Morgan’s broker dealer and banking entity, using an in-house developed blockchain application which supported instantaneous settlement and maturity of the transaction in hours, as opposed to days.
The repo market provides a widely used form of secured financing, however, current operational limitations prevent the meaningful use of such financing to meet intraday liquidity needs. Using blockchain enables borrowers and lenders to execute shorter-term, intraday repo transactions with real-time, simultaneous transaction settlement, creating new ways to access intraday liquidity. Both collateral and cash legs of the repo transaction were settled using blockchain, with the cash leg leveraging JPM Coin.
“The current repo market has some technical inefficiencies, and we identified blockchain technology as a way to reduce our clients’ intraday risk profile,” said Scott Lucas, Head of Markets DLT, J.P. Morgan. “By deploying blockchain, we created new opportunities to streamline operational processes and accelerate settlement for repo. Our new solution will help unlock trapped pockets of liquidity for intraday use and allow for reduced risk profiles for our clients and J.P. Morgan.”
The offering will be made available in production to external counterparties in the U.S. – some of which have already simulated transactions on the new application. J.P. Morgan developed the solution and tested its viability by conducting trades between two of its affiliates, alongside successful simulations of trades with Goldman Sachs and other entities, with BNY Mellon as the triparty agent.
J.P. Morgan recently announced Onyx by J.P. Morgan, a new business unit to scale and commercialize blockchain innovation, with JPM Coin as a key offering from the suite of products, platform, and services. The intraday repo application is deployed on the platform developed and supported by Onyx and uses JPM Coin for the cash leg. “J.P. Morgan’s intraday repo application demonstrates how leveraging foundational technology built by Onyx enables new capabilities like the digital representation of securities ownership, supports unique functionality like atomic trade settlement, accelerates time-to-market, and eases effort required to get to production,” said Christine Moy, who led the work from the Onyx team.
“This is an exciting project which vividly highlights where enterprise blockchain can address a real-world problem in the financial system and we look forward to going live in early 2021,” said Mathew McDermott, Global Head of Digital Assets at Goldman Sachs.
“BNY Mellon is pleased to leverage our expertise as a critical partner for J.P. Morgan to provide much-needed collateral services to market participants looking to execute intraday repo transactions. The distributed ledger technology utilized ensures that clients are meeting their funding needs, and quickly,” said Brian Ruane, Chief Executive Officer of BNY Mellon Clearance & Collateral Management.