DTCC hires three vendors to build distributed ledger for CDS
The Depository Trust and Clearing Corporation in January selected IBM, Axoni, and R3 to build a distributed ledger to handle certain post-trade processing functions for credit derivatives.
The new system will eventually serve as an engine for the DTCC’s Trade Information Warehouse, the system that handles the record keeping, lifecycle events, and payment management for more than $11 trillion of cleared and bilateral credit derivatives. Under the agreement, IBM will serve as the lead contractor, Axoni will supply the distributed ledger infrastructure and smart contract applications, and R3 will act as an advisor. The solution is expected to go live in January 2018.
Executives said the new system will streamline processing for credit derivatives by creating a distributed ledger network with peer nodes at participating firms. The network will be governed by DTCC and managed by IBM. A variety of stakeholders were consulted on the architecture of the new system, including Barclays, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS, Wells Fargo, IHS Markit and Intercontinental Exchange.
“Distributed ledger technology is a natural fit for derivatives processing. By recording and automatically managing shared records of financial agreements in the cloud without error, it can minimize the steps required for post-trade processing and free up middle and back office staff from the onerous task of reconciliation,” said David Rutter, CEO of R3.
The agreement follows a successful pilot project that handled post-trade processing of single-name credit default swaps on a distributed ledger. DTCC, Axoni, IHS Markit, and several market participants took part.
