High-Profile Consortium Completes Successful Blockchain Test for Equity Swaps

133 structured test cases to assess the capabilities of the blockchain technology were conducted in September.

While the mainstream financial community has seen cryptocurrencies such as bitcoin as highly problematic, an increasing number of financial institutions now acknowledge the benefits they can obtain from the blockchain technology, which manages and facilitates the exchange of such currencies.

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With this in mind, a consortium of eight big financial players announced today the successful test of blockchain technology and smart contracts to manage the post-trade lifecycle for OTC equity swaps.

The group, led by Axoni, included Barclays, Citi, Credit Suisse, J.P. Morgan, IHS Markit, Thomson Reuters, and Capco, a global financial services management consulting firm that is part of FIS.

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The working group finalized a trial in which a blockchain trade processing network was established using Axoni’s proprietary distributed ledger software to test automated lifecycle management and synchronisation of single stock, index, and portfolio swaps.

This development further supports the belief that close collaboration among global financial institutions and technology providers will create significant momentum behind the adoption of blockchain and deliver huge advancements in efficiency and scalability.

In a statement, the participants said that earlier in September they completed a test that included 133 structured test cases to assess the functional and non-functional capabilities of blockchain technology for equity derivatives. Axoni said its software achieved a 100% success rate across all tests, as well as matching an efficiency benchmark established by the DTCC Trade Information Warehouse (TIW), the global market standard for post-trade asset servicing of credit derivatives.

Roman Eisenberg, Global Head of Prime Services Technology at Credit Suisse, said: “The proof of concept has shown that blockchain technology lends itself well to solving for the operational complexity and volumes of Equity Swaps lifecycle processing. This can possibly present an opportunity to not only save costs but also reduce operational risks while growing the client offering.”

Lee Braine, CTO Office at Barclays Investment Bank, added: “This experiment adds to a growing number of successful proofs-of-concept and experiments that we have participated in concerning blockchain, distributed ledgers and smart contracts. We are now prioritising the use cases for this technology that have potential to provide significant business value. In particular, we are looking for opportunities to apply smart contracts and shared ledgers to drive process simplification including increasing both standardization and the degree of straight-through-processing. Such innovative optimizations should provide opportunities to rationalise operating platforms, enabling cost reductions whilst improving quality.”

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