Digital Asset Holdings signs Depository Trust & Clearing Corp deal for Blockchain repos trial
Depository Trust & Clearing Corp., a post-trade clearing manager, will trial Digital Asset’s Blockchain derived platform to manage financial repos (repurchasing agreements), a form of short-term borrowing for dealers in government securities where the dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.
According to The Wall Street Journal Depository Trust is hoping that its use of Digital Asset’s Blockchain platform will help smooth over problems “in the crucial but increasingly illiquid corner of short-term lending market” by allowing lenders and borrowers to keep track of securities and cash flowing between firms in real time.
Apparently the ability to track repos is a problem that was singled out following the financial crisis of 2008; currently traders have to process each part of a repo trade separately, with the borrower have to deliver security in exchange for case, along with the Depository Trust having to unwind the trade.
The implementation of a distributed digital ledger, on the other hand, would allow all firms to agree on trade terms more quickly.
“Distributed ledger technology has the potential to revolutionize certain post-trade processes that are inefficient and complex, and repos are a great place to start,” Depository Trust President and Chief Executive Officer Mike Bodson said in a statement. “There are absolute opportunities to make clearing in this area much more efficient, and we look forward to working with Digital Asset on this exciting project. This initiative reflects our strong commitment to leverage this technology and help lead the industry to further lower risk and increase efficiency across financial markets.”
The new deal comes on top of an announcement from Digital Asset in January that it had signed a deal with the Australian Stock Exchange to trial its Blockchain platform to speed up settlements on the exchange.
Of note Depository Trust said that if the trial using Digital Asset’s Blockchain technology is successful in managing repo trades, it would consider rolling it out to other markets it currently provides management services for.
We named 2015 as the year the Blockchain came of age and this announcement, on top of the previous deal, bides well for financial technology in the future being powered by the Blockchain, a technology that itself was invented to manage transactions over the Bitcoin network.
Digital Asset itself is in a race against companies including Symbiont.io and itBit Trust Company to become the gold standard in Blockchain powered system providers to the financial industry, so a deal of this size is also great news from them.
Image credit: home_of_chaos/Flickr/CC by 2.0
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