Deutsche Börse and HQLAx have reported significant progress on blockchain securities lending solution, with six banks already started onboarding.
In March 2018, Deutsche Börse Group and HQLAX announced a cooperation for a securities lending offering based on R3’s Corda blockchain solution. It aims to facilitate more efficient collateral management of high-quality liquid assets (HQLAs), which are in heightened demand due to increased clearing and margin requirements under Basel III regulations.
Following extensive testing during deployment over the past months, the technical set-up is close to final, as is the legal and regulatory framework. Six banks already confirmed that they have started their onboarding processes and will join the platform at launch date, which is expected in the first half of 2019.
Unlike in traditional settlement, there will be no actual movement of securities between custody accounts on the HQLAX target operating model. Instead, tokens will be transferred while the underlying securities will be kept off-blockchain and remain static. This helps market participants to redistribute liquidity more efficiently by providing collateral mobility across systems and locations.
The platform will be accessed via Deutsche Börse’s Eurex Repo trading system. A trusted third party layer will be the interface between the distributed ledger technology (DLT) and legacy securities infrastructure leveraging well-established triparty collateral management services.
Jens Hachmeister, in charge of blockchain initiatives across Deutsche Börse Group, said in a statement: “This blockchain use case reveals the significance and potential of the technology. This creates higher liquidity, transparency and efficiency for financial markets in general and securities financing in particular.”
Clearstream, Deutsche Börse’s post-trading services provider, will act as custodian, and the exchange is in advanced discussions with further custodians to participate.