Deutsche Boerse, Commerzbank Complete Blockchain PoC for Legally Binding Repo Transaction


0

German financial services company Commerzbank and securities marketplace Deutsche Boerse have completed a proof-of-concept (PoC) for a legally binding repo transaction using distributed ledger technology (DLT). The news was reported by Cointelegraph auf Deutsch on March 6.

A repo transaction is commonly used for short-term borrowing, and allows dealers to sell securities to investors — often for as short a time as overnight —  and repurchase them the following day, or as otherwise determined. For the party selling the security, the process is termed a repo, whereas for the counterparty, it is known as a reverse repurchase agreement.

For the DLT-enabled PoC, the repo transaction was based on a 10 million euro ($11.3 million) bond issued by KfW Bankengruppe, for a term of seven days at a negative interest rate of -0.5%.

As Cointelegraph Deutschland reports, to settle the transaction, Commerzbank and Deutsche Boerse generated digital tokens for both commercial bank money and securities. These were then simultaneously exchanged using a Commerzbank-operated DLT platform.

While Commerzbank’s R&D unit “Main Incubator” developed the DLT platform, the full scope of the technology used for the DLT-powered repo transaction PoC — as well as its underlying legal concept — was reportedly developed jointly by the two partners.

As a Commerzbank press release notes, the use of DLT to enable the legally compliant, efficient and transparent settlement of tokenized securities and cash tokens offers distinct advantages over existing legacy systems. These include real-time monitoring, a shortened settlement period, reduced counterparty risk, and a corresponding reduction in operational costs.

Michael F. Spitz, CEO of Commerzbank’s R&D unit, has given a statement on the significance of the PoC, noting that:

“In past [DLT] pilots we have focused on new issue projects; with the transaction between Deutsche Boerse and Commerzbank we were now for the first time able to convert existing securities into digital tokens.”

As the press release outlines, banks often use repo transactions as secured money market instruments in order to cover their “short-term liquidity needs by depositing securities.”

As Cointelegraph has reported, Deutsche Boerse recently revealed that it is making significant progress with its blockchain-powered securities lending platform, co-developed with Luxembourg-based blockchain liquidity management platform, HQLAx. To date, six banks have reportedly confirmed their plan to join the platform, which uses enterprise blockchain consortium R3’s Corda platform as its base.

Last month, Commerbank conducted a pilot for money market security transaction using a Corda-based platform, in partnership with major technology firms Continental and Siemens.

Source : COINTELEGRAPH


Like it? Share with your friends!

0

What's Your Reaction?

hate hate
0
hate
confused confused
0
confused
fail fail
0
fail
fun fun
0
fun
geeky geeky
0
geeky
love love
0
love
lol lol
0
lol
omg omg
0
omg
win win
0
win
COINTELEGRAPH

Comments

comments

Powered by Facebook Comments

Choose A Format
Story
Formatted Text with Embeds and Visuals
Video
Youtube, Vimeo or Vine Embeds
List
The Classic Internet Listicles
Open List
Submit your own item and vote up for the best submission
Countdown
The Classic Internet Countdowns
Poll
Voting to make decisions or determine opinions
Ranked List
Upvote or downvote to decide the best list item
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Meme
Upload your own images to make custom memes
Audio
Soundcloud or Mixcloud Embeds
Image
Photo or GIF
Gif
GIF format