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The Depository Trust & Clearing Corporation (DTCC) will use blockchain technology as the core infrastructure to rebuild platform that manages and processes $11 trillion worth of credit default swaps (CDS).
Announced today, the post-trade services platform for much of the globe’s financial services industry has picked a select number of partners to develop the blockchain platform. Specifically, tech giant IBM and financial blockchain startups Axoni and R3 will now develop and rebuild the DTCC’s Trade Information Warehouse (TIW) with blockchain technology.
The TIW is responsible for record keeping, automating lifecycle events and managing payments of over $11 trillion of cleared and bilateral credit derivatives. Credit-default swaps are, in essence, insurance contracts that are paid off when a bond fails.
In a letter to shareholders in mid-2016, DTCC President and CEO Michael Bodson summed up blockchain as the solution revolutionize the post-trade environment. He added:
We have a once-in-a-generation opportunity to modernize the post-trade environment. We need to work together to make sure we do it right the first time.
The blockchain-based redesign will help reduce costs of derivatives processing while streamlining and automating derivatives processing, the DTCC claims. The announcement comes after a successful test in April 2016 that saw participation from blockchain developer Axoni and a number of banks.
IBM will lead the initiative toward the switchover to blockchain technology with program management, expertise and integration of bitcoin’s underlying innovation while providing the solution-as-a-service. Axoni will help provide the infrastructure and smart contract applications while R3 will act as a solution advisor.
Axoni CEO Greg Schvey called the deployment of blockchain technology at such a scale as “a watershed moment for the industry.”
Bridget Van Kralingen, senior vice president at IBM Industry Platforms added:
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 development of the new platform will begin this month, built on Axoni’s distributed ledger software protocol ‘AxCore’. The finished project will be submitted to the open source Hyperledger project when the solution goes live, expected to occur in early 2081.
Image from Shutterstock.