Frankfurt-based exchange group Deutsche Boerse has entered into a strategic partnership with FinTech firm HQLAX to create a a new securities lending platform. The platform will use R3’s Corda blockchain technology to facilitate collateral management processes and the exchange of high quality liquid assets (HQLA).
The implementation of new bank regulations for liquidity, mandatory clearing, and margin requirements for OTC derivatives have caused a significant increase in demand for High Quality Liquid Assets (HQLAs). The vision behind HQLAX is to provide market participants with a platform that helps improve collateral fluidity by creating a new, more efficient, more transparent and more cost effective marketplace for liquidity transfers.
Under the agreement, Deutsche Boerse will offer a post-trade processing layer, which will interoperate with multiple collateral agents and custodians, and Eurex will provide the repo trading application.This will bring the HQLAX collateral lending application on Corda, known as a CorDapp, one step closer to production.
HQLAX has developed a system which uses digital collateral receipts (DCRs) to enable a legal transfer of baskets of securities between custody accounts, without the physical movement of assets. DCRs will represent baskets of securities held for safekeeping at a trusted third party. The free exchange of DCRs will affect legal title transfer of the underlying securities that comprise the DCRs, thereby facilitating liquidity transfers without the operationally onerous requirement to move securities
Recently, London-based HQLAX facilitated the first securities lending transaction, valued at €25 million, between Credit Suisse and ING using R3 Corda’s blockchain platform. During the transaction, Credit Suisse and ING agreed to transfer legal ownership of Dutch and German government securities on the platform using HQLAᵡ Digital Collateral Records (DCRs) while the underlying securities remained static within unique DCR-linked custody accounts held by Credit Suisse and ING at Credit Suisse (Switzerland) Ltd.
Guido Stroemer, CEO of HQLAX said
“Our goal is to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the globe. Partnering with Deutsche Boerse group enables us to maximise the network effect that will drive widespread adoption of the HQLAX platform.”
Philippe Seyll, co-CEO, Clearstream Banking and executive manager, Deutsche Boerse group, said
“With the creation of a neutral custody agnostic control layer, Deutsche Boerse is embracing distributed ledger technology and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents.”
