Broadridge has gone live with a new trading platform based on distributed ledger technology (DLT) which it believes will transform the repo market for banks and investment firms.
The distributed ledger repo (DLR) platform builds on the success of multiple pilots with buy- and sell-side firms, including Natixis and Societe Generale, and will enable firms to agree, execute and settle repo transactions on a decentralised platform.
The move could potentially transform the repo market, where firms have historically swapped high-quality collateral for cash on a bilateral basis, as it will utilise smart contracts to transfer ownership of underlying securities without the need to physically exchange.
According to the FinTech giant, the DLR platform has executed $31 billion in average daily volume in the first week since its launch.
“This is the first step in the transformation of the $10 trillion global bilateral repo market using smart contracts and distributed ledger technology,” said Vijay Mayadas, president of capital markets at Broadridge.
“Co-innovating with market participants, we are able to bring solutions to our network of clients that create the next level of operational efficiencies. Within the repo market, distributed ledger technology and smart contracts have shown that they can play an instrumental role in driving efficiencies, reducing risk and enhancing liquidity while leveraging the existing legal and account frameworks.”
Leveraging Broadridge’s leading fixed income trade processing platform, DLR utilises smart contracts from Digital Asset as well as VMware Blockchain, a highly scalable distributed ledger platform. DLR reduces operational risk and settlement cost for repurchase, or repo, agreements by providing a secure record of repo trade details, reducing the need for reconciliation and removing obstacles to straight-through-processing.
“By coupling emerging technologies like distributed ledger technology and smart contracts with existing operational account structure functionality, Broadridge has enabled real-time securities mobility in the repo market,” said Vinod Jain, senior analyst at Aite Group. “This is a powerful value proposition for firms, especially those looking to reduce risk and enhance operational efficiencies.”
Blockchain has been frequently tested by banks and technology firms to improve the repo trading infrastructure. In December, JP Morgan revealed it completed an intraday repo transaction using its custom-built blockchain platform, Onyx, following tests completed with Goldman Sachs and BNY Melllon.