A partnership is brewing between Deutsche Borse and HQLAx, the liquidity and collateral management firm, and R3, a blockchain consortium. This partnership will focus on creating a front-to-back model that will help in securities lending.
According to this program, Eurex will be providing the repo-trading application while the post trade processing layer will be catered for by Deutsche Borse. This is expected to interoperate with various collateral custodians and agents.
Legal Title Transfer of Securities in the Offing
In cases where there are traditional settlements of lending transactions for securities, individual underlying securities go through inter-account transfers. However, the main of HQLAx’s operating model is to gain a legal title transfer of securities baskets via the transfer of ownership of digital collateral records. In the end, the aim would be to facilitate the mobilization of liquidity across pools of collateral that reduce in a disparate custody account.
Notably, ING and Credit Suisse were the first to take up live collateral swaps early this month, complete with full legal exchange of settlements and contracts through the use of an R3 corda-based collateral lending app that was created by HQLAx.
Market Adoption Galore
With this partnership, Deutsche Borse is expected to help foster market adoption and thus enable smooth connectivity with HQLAx, both in terms of post trade processing and trade execution.
The Executive Manager at Deutsche Borse Mr Phillippe Seyll believes:
With the creation of a neutral custody agnostic control layer, Deutsche Börse is embracing distributed ledger technology and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents.
This is a partnership that is expected to create a buzz in the industry, and more developments are expected in future.
What do you think about Deutsche Borse’s partnership with HQLAx and R3? What impact do you think this new development will have? Let us know your views in the comments section below.