Banking Investment News

Wells Fargo backs blockchain derivatives startup

derivatives trading

Today Wells Fargo announced the latest tranche of its Startup Accelerator program. One of the companies selected is OpenRisk Technologies which uses blockchain to manage collateral and liquidity for derivatives traders.

Companies that are accepted into the accelerator receive up to $1 million in funding and guidance from Wells Fargo for six months.

Blockchain is just one aspect of the OpenRisk platform and it leverages Hyperledger technology. The company says it uses “AI-powered Smart Contracts for collateral management”. It also uses machine learning and artificial intelligence for document rationalization. Plus there’s automated margin management, with a user interface to manage exceptions.

The company was founded in 2016 by Narasimha Kodihali who has more than ten years of experience in technology in the derivatives and collateral space. Most recently he was a manager at PwC for Financial Services, and before that, he was a solutions architect for Lombard Risk. His track record includes brief stints at Credit Suisse and Bank of New York Mellon, with more extended periods as a senior developer at Goldman Sachs and UBS.

Derivatives and collateral use cases

Other blockchain systems are targeting either derivatives or collateral management, but separately. ISDA the derivatives trade body recently created a new set of standards and last year with Barclays ran a hackathon to explore the use of the standards. Shortly afterward Baton Systems announced that its technology now supports ISDA’s Common Domain Model.

DTCC is expected to launch its new DLT version of Trade Information Warehouse (TIW) in Q2 of this year. The existing version processes $9.9 trillion of cleared and bilateral derivatives.

And in Korea Shinhan Bank has adopted blockchain and smart contracts for Interest Rate Swaps.

The high profile collateral management blockchain is HQLAX which recently announced it had received more funding from Deutsche Boerse and is also expected to go into production in Q2 of this year.


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