Yesterday, blockchain firm Clearmatics announced that it has been working with XTX Markets to build a collateral management platform. The firms aim to create a member-owned network which allows for automated processes, with the launch slated for 2020.
Although the firms have not specified the type of collateral it could potentially include currencies, government securities, bonds, equities, or commodities. Managing it can hence be a complicated task, with valuation, calls and settlement.
Clearmatics and XTX hope to address these issues with automation. Using distributed ledger technology (DLT) settlements, in particular, could be done almost instantly without tedious admin.
“The current technology, processes and market infrastructure around collateral management are antiquated and resulted in greater operational risk in the system,” said Mike Irwin, COO of XTX Markets.
He continued: “Partnering with Clearmatics to modernise how collateral obligations and their associated processes are managed today makes absolute sense.”
Yaser Jazouane, the Head of Growth for Clearmatics, stated the firm plans “to deliver a new type of market infrastructure that automates the management and settlement of collateral, unlocking capital and generating new revenue for its members.”
The other founders behind this collateral project are currently unnamed. But it was revealed that XTX and Clearmatics have been working on it for six months.
XTX Markets is an electronic market maker across several asset classes, but one of the largest in the foreign exchange markets. Across all its markets, the firm processes a daily volume of $150 billion.
The London-based tech startup Clearmatics is one of the firms behind the decentralized Utility Settlement Coin (USC), which is backed by central bank deposits. It boasts over $63 million in funding and support from 14 global banks and Nasdaq. Two weeks ago, the USC was revealed to have a potential use case in foreign exchange (FX) swaps.
Meanwhile, XTX is one of the first clients of the Cobalt DLT FX platform, and its subsidiary was an early investor in Clearmatics. It’s unclear whether the project will focus on the foreign exchange sector, and we had not received clarification at the time of publication.
However, depending on the focus of the project, the firms may have to contend with HQLAX, perhaps the most well-known blockchain-based collateral platform. It was launched with ING, a backer of Clearmatic’s USC, and Deutsche Börse. The platform recently simulated trades with global banks in preparation for launch next month.
Earlier this year, the Spanish stock exchange tested blockchain for digitizing collateral certificates.