Capital markets Feature News

Barclays blockchain hackathon helps accelerate $2.5billion cost savings

derivatives trading

While last week’s Barclays-hosted hackathon may have targeted the derivatives sector, many industries including non-financial ones could similarly leverage hackathons. The derivatives industry body ISDA has a new standard that defines the processes for derivatives transactions such as interest rate swaps and credit default swaps. If the industry adopts this standard using distributed ledger technology (DLT), the efficiencies could potentially save the sector $2.5 billion a year. The hackathon helped accelerate the adoption path.

Lee Braine from the Chief Technology Office at Barclays explained the thinking behind ISDA’s new standard: “Across the post-trade derivatives industry, there is infrastructure deployed that is too complex for its current purpose, and the proposal is analogous to pressing a technology ‘reset button’ allowing you to go back and radically simplify the nature of that infrastructure.”


To do that you need standardized data and business processes. So ISDA, with input from several banks, created its Common Domain Model (CDM) published in June. DLT also appeared at a convenient time to help implement this simplification.

Braine emphasized that when it comes to blockchain, standards are essential. “Blockchain works very effectively when you have common data structures and common processing in terms of smart contracts. So the fundamental technological enabler is initial agreement on those common standards.”

A trade association, if one exists for a particular sector, is the natural home for such standards. They decided not to try to force any particular DLT features or DLT standards. Instead, the focus of the CDM is on the data and the processes, rather than specific technologies. The CDM could also be implemented on non-DLT technologies.

“We asked that, irrespective of the technology stack underneath and irrespective of the platform features underneath, could solutions nonetheless adhere to a common data payload and a common set of processing events? If so, that’s actually a worthy goal and standard to aim for because we can then encourage different platforms to adopt it.”

However, one technical observation Braine had was that there will probably be a need for an abstraction layer between the Common Domain Model and the underlying technology. For example, such a layer might help close the gaps for any differences in data and processes between life cycle events defined in the CDM and existing programming interfaces provided by the technology platform. Some blockchain technologies will need more effort to implement that layer.

About the hackathon

There were two Hackathon events run in parallel. Seventeen teams participated in London and another thirteen in New York.

There was broad participation across both the financial and blockchain industries. IBM supported Hyperledger Fabric developers, R3 for Corda, Digital Asset had its own team, as did JP Morgan (Quorum). That breadth extended to the judges drawn from Barclays, ISDA, JP Morgan, HSBC, UBS, as well as REGnosys and universities.

The participants weren’t all directly blockchain or banking related. Clause, the legal smart contract company behind Accord, also participated. As did iPushPull which implemented its solution on Symphony, the bank messaging and bot company spun out of Goldman Sachs.

Before the event, ISDA and Barclays provided participants with a substantial set of materials including several videos. Most hackathons focus on coding on-site on the day. In the case of the Barclays hackathon, all the teams were given two use cases with test data two weeks in advance. At the event, they were then given another four use cases to implement.

Deloitte will provide a detailed report in six weeks time.

Hackathon benefits

The primary benefit for ISDA was they engaged the industry and received feedback. Clive Ansell, ISDA’s Head of Market Infrastructure and Technology said: “The interest from our perspective was to have an opportunity to expose that model to a wide variety of industry participants. Some incumbents, some new, some fintechs. And really explore how fit for purpose that model is.”

They received significant positive feedback that the CDM is something the industry needs. Ansell is looking forward to getting more detailed feedback from teams about things they found easy, difficult or unnecessary. The Hackathon was a good a way to get some early insights and feedback while ISDA works through more extensive proofs of concept.

Having the ISDA team explain and discuss the CDM with individual groups was also beneficial. Often when you explain or educate on a topic, you get a lot of feedback. That dialogue helps you to articulate things differently in the future for that audience.

Ansell commented that having an experienced partner like Barclays helped tremendously.

For fintechs, to understand how bank processes work they have to engage with individual banks which have quite a bit of bureaucracy in their onboarding processes. For startups to interact with multiple banks is a big hurdle. But if the data and processes for the solutions are standardized, then it is easier and quicker for banks’ technical due diligence to approve those fintech solutions.

Brian Nolan from startup Finteum participated in one of the R3 teams. He commented that while most participants were coders, in London, there were a few business people like himself. “From trading derivatives, I have an insight into how that market works. It was a really interesting way to partner with software engineers to build something in a pressurized environment, to see what’s possible on Corda.”

The winners

In the competitive world of banking, the winners matter even more than elsewhere.

The winners are:
Best Overall Solution: Digital Asset (London), Baton Systems (New York)
Completeness: JRX (JDX, R3, Xceptor) (London), JP Morgan (New York)
Solution Architecture: (London), Chatham Financials (New York)
Best Presentation: Industria (London), Cryptonomic (New York)

The final takeaway is that hackathons are a great way to expedite testing the validity of technical standards in any industry. It’s a win-win for all parties. Even when there aren’t $2.5 billion of potential savings to gain from those standards.