Banking Investment News

DTCC starts testing blockchain derivatives platform

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Today the DTCC announced it has entered the test phase for its updated credit derivatives Trade Information Warehouse (TIW). TIW processes $9.9 trillion of cleared and bilateral derivatives. Fifteen leading global banks are testing the new distributed ledger technology platform, including Barclays. The platform is expected to launch in Q2 of 2019.

The other 14 banks were not mentioned in the statement, but the 2016 proof of concept included Bank of America, Citi, Credit Suisse, and JP Morgan.

Lee Braine from the Chief Technology Office at Barclays commented: “We are pleased to be working with DTCC, our partners and colleagues on this exciting project to bring distributed ledger technology to life in a demonstrable way that will enhance efficiencies and lower costs and risks for the industry.”

The TIW serves as the golden record for bilateral credit derivatives. The platform provides payment calculations, settlement services via CLS and processes credit events. Because the credit derivatives models and processes are standardized, it made TIW a good test candidate for DLT. It also means reporting to regulators can be sourced from the same set of records.

Testing

The test involves using simulated data to validate interactions between DTCC and bank systems as well as other key market infrastructure providers such as MarkitSERV and its new platform for credit called TradeServ. Additionally, the system will need to integrate with CLS for central settlement as well as vendors and service providers including custodians.

After this phase, next up is an “open” testing phase for a broader set of participants to make sure they can integrate with the new system. That’s expected to happen before the end of the year, and testing is anticipated to finish by the end of Q1 of 2019 with the launch shortly afterward.

“The transformation of DTCC’s Trade Information Warehouse using distributed ledger and cloud technology, along with the modernization of MarkitSERV’s confirmation system, is truly a ground-breaking effort pushing the boundaries of technology use in the industry,” stated Chris Childs, CEO of DTCC DerivSERV.

The project has taken only 18 months to date since selecting the team which includes IBM as project manager, Axoni’s technology and R3 as consultant.