This time blockchain’s inherent strengths are working to weed out inefficiencies of collateral processing.
In a Proof of Concept (PoC) developed by Nasdaq for the DLT (Distributed Ledger Technology) nodes, where ABN AMRO Clearing, EuroCCP and Nasdaq Clearing worked on a specific front-end and managed integration into their own environments, blockchain turned out useful to give an efficient securities collateral solution.
This matters a lot in light of many struggles in collateral management, made heavier with recent market changes, tricky time-constraints, extended trading hours by stock exchanges and the requirement to centrally clear derivatives traded bilaterally (OTC) under the European Market Infrastructure Regulation (EMIR).
But now, thanks to blockchain, Julia Haglind, CEO of Nasdaq Clearing seems happy. “We believe that blockchain technology brings with it a huge potential to transform markets everywhere, and this project is an excellent showcase of this.”
With the PoC, parties could handle the margin call, the securities collateral delivery and the return process in a matter of minutes. Not only that, clearing participants and CCPs could also optimise their collateral positions through a collateral dashboard.
Some of them are looking forward to address counter-party risk protection of equity trades after hours along with operational complexities too.