For more than 40 years, the Depository Trust & Clearing Corporation (DTCC) and its subsidiaries have been serving the post-trade market infrastructure for advancing automation and streamlining the processes that are critical to the post-trade industry. Today, DTCC announced that it has selected IBM, in partnership with Axoni and R3, to provide a distributed ledger technology (DLT) framework. Together, the firms plan to re-platform the DTCC’s Trade Information Warehouse (TIW) to build a distributed ledger solution for post-trade processing that will facilitate post-trade lifecycle events such as improvements and derivatives. The TIW currently automates the record keeping, lifecycle events, and payment management for more than $11 trillion of cleared and bilateral credit derivatives.
Creating a DLT solution will enable DTCC and its clients to streamline, automate, and reduce the cost of derivatives processing by eliminating disjointed, redundant processing and the associated reconciliation costs. This endeavor has been developed with input from market participants Barclays, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS, Wells Fargo, HIS Market and Intercontinental Exchange, and key market infrastructure providers.
IBM will lead this initiative, provide program management, DLT expertise, and integration services, and offer the solution-as-a-service. Axoni will provide the distributed ledger infrastructure and smart contract applications, with R3 acting as a solution advisor. David Rutter, CEO of R3, stated:
“We’re very excited to be working with this team, as DTCC seeks to enhance its derivatives processing technology. Distributed ledger technology is a natural fit for derivatives processing. By recording and automatically managing shared records of financial agreements in the cloud without error, it can minimize the steps required for post-trade processing and free up middle and back office staff from the onerous task of reconciliation.”
Bridget Van Kralingen, Senior Vice President of IBM Industry Platforms, comments:
"As one of the largest and most groundbreaking distributed ledger projects to date in the financial services industry, DTCC together with its member banks are reimagining the credit derivatives process. The combined expertise of IBM and our partners enables us to provide DTCC with a resilient, open and innovative new technology platform to support this groundbreaking opportunity."
Greg Schvey, CEO of Axoni, said:
“Deploying distributed ledger technology in production at this scale is a watershed moment for the industry. The combination of technology and business expertise being contributed to this project from across the participating firms is unparalleled and the benefits are clear. We look forward to working with DTCC and the project partners to bring those benefits to the market.”
DTCC plans to begin development this month and expects the project to go live in early 2018, at which point it will be submitted to Hyperledger, an open source blockchain-based collaboration project under the Linux Foundation.
As the blockchain technology gains more momentum, DTCC is pursuing additional PoCs and opportunities of leveraging DLT. Chris Childs, CEO of DTCC Deriv/SERV, said:
“IBM, Axoni and R3 offer valued DLT expertise as well as a strong commitment to the Hyperledger community and industry standards. We are pleased that they have chosen to leverage their collective expertise and collaborate with us on this initiative, which will allow us to build the best solution for the marketplace while minimizing cost to the industry and expediting our speed to market.”