J.P. Morgan’s TCN facilitates collateral settlement for a live-client OTC derivative transaction
11 October 2023 US
Image: New Africa
J.P. Morgan’s Tokenized Collateral Network (TCN) has facilitated a collateral settlement for a live-client over-the-counter (OTC) derivative transaction for the first time.
As part of the initiative, BlackRock and Barclays are now live on TCN, an application which sits on J.P. Morgan’s Onyx Digital Assets platform, operating as a private blockchain. It is used for tokenised asset movements, including collateral settlements.
This means counterparties can transfer the ownership of the collateral assets on TCN for the transfer of assets on a near instantaneous basis, says J.P Morgan.
During the transaction, tokenisation occurred within a matter of minutes through connectivity between the fund’s transfer agent and TCN. The transfer between BlackRock and Barclays was near instantaneous.
Shares in money market funds (MMFs) were used as collateral between bilateral derivatives counterparts for the first time.
The ability to tokenise assets, and use them under both title transfer and pledge structures, outside of any limiting market operating hours, has the potential to fundamentally change the collateral market, says J.P. Morgan.
BlackRock has tokenised the representation of shares in a BlackRock Money Market Fund through TCN. The use of blockchain settlement technology to transfer the ownership of MMF shares will also bring additional utility to MMFs, which has the potential to increase their resiliency.
The tokenised representation of the MMF shares were transferred to Barclays to cover collateral requirements – the underlying documentation was amended to support the delivery of MMF shares as collateral.
J.P. Morgan has said that it expects to expand TCN’s capabilities across equities, fixed income and a range of asset classes in the future.
TCN was built jointly between J.P. Morgan’s collateral services team and Onyx Digital Assets.
Ed Bond, head of trading services at J.P. Morgan, says: “This first transaction with BlackRock and Barclays demonstrates the power of tokenised assets, particularly in a collateral setting. MMFs can now be mobilised and utilised in a more efficient way, unlocking new pools of liquidity to be used for margining. We plan to add participants and assets to the Tokenized Collateral Network in the coming months.”
Tom McGrath, deputy global chief operating officer of the cash management group at BlackRock, comments: “We believe that money market funds play an important role in providing liquidity to investors in times of high market volatility.
“The tokenisation of MMF shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures. We're excited to work with J.P. Morgan and Barclays to improve market efficiencies through this first trade.”
Matthew Collison, head of resource management group at Barclays, adds: “Barclays has a long history of helping clients navigate change to deliver results. We are therefore pleased to partner with BlackRock and J.P. Morgan who executed this transfer, as this is a terrific example of driving innovation in post-trade settlement.”
As part of the initiative, BlackRock and Barclays are now live on TCN, an application which sits on J.P. Morgan’s Onyx Digital Assets platform, operating as a private blockchain. It is used for tokenised asset movements, including collateral settlements.
This means counterparties can transfer the ownership of the collateral assets on TCN for the transfer of assets on a near instantaneous basis, says J.P Morgan.
During the transaction, tokenisation occurred within a matter of minutes through connectivity between the fund’s transfer agent and TCN. The transfer between BlackRock and Barclays was near instantaneous.
Shares in money market funds (MMFs) were used as collateral between bilateral derivatives counterparts for the first time.
The ability to tokenise assets, and use them under both title transfer and pledge structures, outside of any limiting market operating hours, has the potential to fundamentally change the collateral market, says J.P. Morgan.
BlackRock has tokenised the representation of shares in a BlackRock Money Market Fund through TCN. The use of blockchain settlement technology to transfer the ownership of MMF shares will also bring additional utility to MMFs, which has the potential to increase their resiliency.
The tokenised representation of the MMF shares were transferred to Barclays to cover collateral requirements – the underlying documentation was amended to support the delivery of MMF shares as collateral.
J.P. Morgan has said that it expects to expand TCN’s capabilities across equities, fixed income and a range of asset classes in the future.
TCN was built jointly between J.P. Morgan’s collateral services team and Onyx Digital Assets.
Ed Bond, head of trading services at J.P. Morgan, says: “This first transaction with BlackRock and Barclays demonstrates the power of tokenised assets, particularly in a collateral setting. MMFs can now be mobilised and utilised in a more efficient way, unlocking new pools of liquidity to be used for margining. We plan to add participants and assets to the Tokenized Collateral Network in the coming months.”
Tom McGrath, deputy global chief operating officer of the cash management group at BlackRock, comments: “We believe that money market funds play an important role in providing liquidity to investors in times of high market volatility.
“The tokenisation of MMF shares as collateral in clearing and margining transactions would dramatically reduce the operational friction in meeting margin calls when segments of the market face acute margin pressures. We're excited to work with J.P. Morgan and Barclays to improve market efficiencies through this first trade.”
Matthew Collison, head of resource management group at Barclays, adds: “Barclays has a long history of helping clients navigate change to deliver results. We are therefore pleased to partner with BlackRock and J.P. Morgan who executed this transfer, as this is a terrific example of driving innovation in post-trade settlement.”
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