State Street and Vanguard have jointly completed the margin calculation process for a live trade of a 30-day foreign exchange forward contract using Symbiont’s distributed ledger technology (DLT), Assembly.
Together, the firms have been actively looking into the application of blockchain technology to undertake margin processing for foreign exchange forwards and swaps.
Their goal was to bring post-trade workflow automation and efficiencies while significantly reducing the amount of counterparty credit risk in the over-the-counter currency market.
The firms claim that harnessing the benefits of blockchain technology within the largely manual currency forwards market will eventually enable the underlying contracts to also be instantiated, signed, executed and documented on a single unalterable record, digitally securing the trades and allowing for automation over their duration.
By deploying these contracts on DLT, more frequent and automated valuations can be facilitated.
In addition, the move allows parties in the network to move and settle collateral instantly, which in turn reduces counterparty risk and streamlines processes for those forwards that are not cleared and subject to margining.
“State Street Digital is incredibly pleased to have collaborated with both Vanguard and Symbiont on this monumental industry initiative to digitise the margining process around collateralised foreign exchange forward contracts that will reduce our customers operational challenges through process automation and state of the art technologies,” said Nadine Chakar, head of State Street Digital.
“Our newly launched division, State Street Digital, was created to help drive innovation and address the industry’s digital transformation. We appreciate the joint collaboration on this project and look forward to future partnerships and further developing our digital capabilities for the crypto and digital assets environment.”