UBS Leverages Blockchain Innovation for Cost Savings in Repo Business
Swiss banking giant UBS is forging ahead with its blockchain initiatives, introducing a new solution aimed at cost reduction within its repo business. The bank has successfully integrated a repo solution from Broadridge Financial Solutions, a US-based financial services provider, centered on the Distributed Ledger Repo (DLR) platform.
In a press release issued on Monday, UBS underscored the significance of this step, emphasizing the benefits it brings to clients, including substantial settlement cost savings, operational streamlining, scalability, and a reduction in operational risks through the utilization of distributed ledger technology and smart contracts.
According to Christian Rasmussen, the Head of Investment and Execution at Group Treasury UBS, “By digitizing our existing sponsored repo trade flow and incorporating those trade flows into our DLR tech stack on Broadridge’s platform, we can increase efficiencies while reducing the risk of fails and lowering our settlement costs.”
The expansion of the DLR platform on a global scale to encompass both sell-side and buy-side firms is expected to generate a network effect, enhancing value and facilitating a broader array of transaction types, as highlighted in the statement. Broadridge has emerged as a frontrunner in the arena of distributed ledger capabilities, particularly in its endeavor to transform the $1 trillion per month global repo market.
UBS achieved another significant milestone in early April when it executed its first cross-border intraday repo transaction with a global Asian bank, utilizing the DLR platform provided by the US firm. This transaction is viewed as a pivotal step towards more efficient intraday liquidity management. Notably, one of the key advantages of the DLR platform is its ability to offer greater flexibility in settlement timing.
In a broader context, UBS is actively placing substantial bets on blockchain technology. In November of the previous year, the bank issued the largest blockchain bond to date on the SIX Digital Exchange (SDX), raising 375 million Swiss francs ($410 million) with a dual listing on the SIX. This groundbreaking bond issuance was entirely settled through blockchain technology.
Furthermore, UBS, along with Credit Suisse, which it has subsequently acquired, holds the distinction of being one of the founding shareholders of Fnality International. Established in 2019 by an international consortium of banks, Fnality International is a UK-based financial technology firm specializing in blockchain-based payment solutions for the future.
In sum, UBS’s latest move to integrate the Distributed Ledger Repo (DLR) platform into its repo business exemplifies the bank’s unwavering commitment to harnessing blockchain innovation for enhanced operational efficiency and cost savings. This endeavor not only benefits UBS but also contributes to the broader transformation of the global repo market, underlining the enduring significance of blockchain technology in the financial sector.