Deutsche Börse is launching a blockchain technology initiative targeting cross-border mobilisation of security collateral, having teamed up with four members of the Liquidity Alliance (LA), an international group of central securities depositories (CSDs).
The distributed ledger technology (DLT) based LA Ledger prototype aims to enable a centralised and more efficient allocation of fragmented security positions to cover financial obligations of participants in multiple jurisdictions.
Validation by regulatory authorities and market participants will start in Q2 of 2017.
“We are proud to be part of this exciting LA Ledger initiative which is adding another leading edge solution to our suite of collateral management services to the benefit of our mutual clients,” said Philippe Seyll, co-CEO Clearstream Banking S.A. at Deutsche Börse Group.
The Canadian Depository for Securities Limited (CDS), Clearstream (Luxembourg), Strate and VPS are the four LA members collaborating with Deutsche Börse on the initiative.
“With this initiative, we pursue an innovative partnership approach that will allow us to jointly embark on distributed ledger technology with a use-case that is highly relevant to the wider industry”, said Glenn Goucher, president and chief clearing officer at CDS.
Following the financial crisis, regulators increasingly require market participants to provide collateral to mitigate risks in the financial system.
The Dodd-Frank Act in the US and European Market Infrastructure Regulation (EMIR) in the EU are two frameworks in this regulatory space leading to a growing demand for high-quality collateral to which access is limited.
The decentralisation of DLT allows for direct interaction between participants giving it the potential to simplify complex processes.