CSDs find new ally for blockchain collateral scheme
18 January 2017 Frankfurt
Image: Shutterstock
Four international central securities depositories (CSDs) are collaborating with Deutsche Boerse to build a blockchain-based prototype for cross-border collateral transfer.
The Canadian Depository for Securities Limited (CDS), Clearstream in Luxembourg, South Africa’s Strate, and Norway’s VPS are all members of the Liquidity Alliance, an international consortium of CSDs focused on collateral management.
They are partnering with Deutsche Boerse to create the LA Ledger solution, intended to provide faster and more efficient mobilisation of security collateral and to overcome some of the challenges of moving collateral across jurisdictions.
Under the US Dodd-Frank Act and the European Markets Infrastructure Regulation, there is demand for high-quality collateral, and limited access. Moving such collateral around is a regulatory requirement for mitigating risk in the financial system.
LA Ledger will use decentralised distributed ledger technology, allowing direct interaction between participants and thereby simplifying the collateral mobilisation process.
In theory, fragmented security positions will be more allocated more efficiently, covering participants’ financial obligations in different jurisdictions.
The solution will initially be implemented as a prototype, based on the Hyperledger Fabric blockchain. Validation from market participants and regulatory authorities is scheduled to begin in Q2 2017.
CEO of VPS John-Arne Haugerud commented: “LA Ledger is designed to simplify cross-border collateralisation away from using multiple complex and non-standardised links towards smooth movement across various jurisdictions.”
Glenn Goucher, president and chief clearing officer at CDS, added: “With this initiative, we pursue an innovative partnership approach that will allow us to jointly embark on distributed ledger technology with a use case that is highly relevant to the wider industry.”
Monica Singer, CEO of Strate, said: “We look forward to engaging with regulators and market participants to validate the proposed solution.”
She added: “We are convinced that integrating this new technology into a permissioned environment of neutral regulated entities is the right way forward.”
The Canadian Depository for Securities Limited (CDS), Clearstream in Luxembourg, South Africa’s Strate, and Norway’s VPS are all members of the Liquidity Alliance, an international consortium of CSDs focused on collateral management.
They are partnering with Deutsche Boerse to create the LA Ledger solution, intended to provide faster and more efficient mobilisation of security collateral and to overcome some of the challenges of moving collateral across jurisdictions.
Under the US Dodd-Frank Act and the European Markets Infrastructure Regulation, there is demand for high-quality collateral, and limited access. Moving such collateral around is a regulatory requirement for mitigating risk in the financial system.
LA Ledger will use decentralised distributed ledger technology, allowing direct interaction between participants and thereby simplifying the collateral mobilisation process.
In theory, fragmented security positions will be more allocated more efficiently, covering participants’ financial obligations in different jurisdictions.
The solution will initially be implemented as a prototype, based on the Hyperledger Fabric blockchain. Validation from market participants and regulatory authorities is scheduled to begin in Q2 2017.
CEO of VPS John-Arne Haugerud commented: “LA Ledger is designed to simplify cross-border collateralisation away from using multiple complex and non-standardised links towards smooth movement across various jurisdictions.”
Glenn Goucher, president and chief clearing officer at CDS, added: “With this initiative, we pursue an innovative partnership approach that will allow us to jointly embark on distributed ledger technology with a use case that is highly relevant to the wider industry.”
Monica Singer, CEO of Strate, said: “We look forward to engaging with regulators and market participants to validate the proposed solution.”
She added: “We are convinced that integrating this new technology into a permissioned environment of neutral regulated entities is the right way forward.”
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