Corp and technology startups Axoni and R3 CEV have been selected
to work on the project which is set to kick-off this month, DTCC
said on Monday. It expects the new blockchain-enabled Trade
Information Warehouse to go live in early 2018.
The project is one of the largest implementations of the nascent
technology in mainstream financial markets to have been made
public to date. Blockchain is a shared record of transactions
maintained by a network of computers on the internet.
The project is being developed with input from market
participants and infrastructure providers including Barclays
Plc, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG,
JPMorgan Chase & Co, UBS Group AG, Wells Fargo & Co, IHS Markit
Ltd and Intercontinental Exchange Inc, DTCC said.
Blockchain will reduce the costs and complexity of managing
credit default swaps, which are essentially contracts that
insure bond-holders against losses if the bond goes bad.
DTCC’s platform keeps track of the security throughout the
lifecycle of the associated bond. Blockchain can simplify the
process by automatically maintaining a shared electronic record
of the security which is visible to all relevant parties.
The decision to implement the technology follows a test
conducted by DTCC and banks in 2016 which proved some of the
advantages of using blockchain, said Michael Bodson, president
and chief executive officer of DTCC.
"The test showed that distributed ledger technology could handle
all the various types of events processing needs for credit
default swaps and it showed that it could be done at a lower
cost point than what can be done with our existing
infrastructure," Bodson said.
The implementation comes after a year marked by a flurry of
blockchain tests and ambitious announcements from financial
institutions and technology companies, leading skeptics to
question whether the technology underpinning cryptocurrency
bitcoin was being over hyped.
"The project will prove to the industry that it (blockchain) is
a powerful technology that can deliver benefits," Bodson said.
DTCC is also working with New York-based startup Digital Asset
Holdings on developing blockchain-based technology for the
syndicated loans market.
(Reporting by Anna Irrera; Editing by Lisa Shumaker)
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