This article was first published by Securities Finance Times
For decades, the securities finance industry has faced inefficiencies caused by fragmented settlement infrastructure. This is especially evident for banks moving balances at scale between triparty agents and custodians where cross-venue settlements represent a barrier to enhanced optimisation.
At HQLAX, we’ve partnered with leading banks, triparty agents, custodians, and service providers to address this head-on. The result is the Digital Collateral Record (DCR)Longbox—a service built on our distributed ledger platform that enables seamless, cross-agent collateral transfers without triggering cross-custodian settlements.
This is a step-change in how the market can operate. Using the DCR Longbox, banks will be able to fulfil triparty collateral obligations without needing to move securities out of their home custodians. This capability simply doesn’t exist in today’s infrastructure: it opens the door to faster, more efficient settlement processes.
By leveraging distributed ledger technology as a single source of truth, the HQLAX platform enables direct, validated transfers to and between triparty agents. This extends intra-day settlement windows and supports real-time ownership verification, significantly enhancing operational agility.
The core value of the DCR Longbox lies in its ability to unlock collateral mobility at scale. Market participants can now mitigate traditional settlement constraints, optimising asset deployment across trades, asset classes, and custodial locations. This lays the foundation for new use cases, including intra-day optimisation and 24/7 collateral transfers powered by DLT.
As with all our initiatives, the DCR Longbox is designed to integrate with existing infrastructure and workflows, delivering tangible business benefits without requiring whole sale technical or operational change. It’s another example of how HQLAX is helping the industry move beyond experimentation and into production-grade innovation.
The initial working group finalised a legally secure and operationally deliverable design for the DCR Longbox in 2024. The focus has now shifted to onboarding the necessary participants to bring this service to market in 2025, in close collaboration with key industry participants.
A critical enabler of success is the establishment of strong, reliable connections with existing custodians. These integrations are essential to ensure that the value of the DCR Longbox can be fully realised across the ecosystem. To support this, the HQLAX platform is designed to work with established instruction channels (including SWIFT and APIs) so that banks can connect using their existing operational processes and workflows.
Triparty agents are actively shaping the operational model by adapting their collateral schedules to align with the new capabilities, while maintaining consistency with their current practices. This collaborative approach ensures that the DCR Longbox is not only innovative, but also practical and immediately usable within the existing market structure.
One tangible benefit of DCR Longbox is its ability to resolve long-standing “trapped asset” challenges. These are assets that, under current market infrastructure, cannot be used in triparty, either because they are held at a local custodian that lacks outbound settlement capability, or because they become stranded overnight when cross-custodian settlement windows close.
With the HQLAX platform, banks can on-ramp these assets to the ledger directly in their domestic custodian—even after traditional settlement windows have closed. Once on-ledger, those assets can be assigned to a triparty agent, enabling banks to mobilise previously idle inventory and reduce associated unsecured funding costs.
DCR Longbox represents a significant step forward in modernising collateral management using distributed ledger technology. By addressing historical friction points and enhancing operational flexibility, it enables market participants to achieve greater precision and efficiency in how they deploy collateral.
Banks benefit from faster, more accurate mobilisation of assets, reducing settlement charges and unlocking cost efficiencies. At the same time, triparty agents and custodians retain custody balances, supporting their commercial models while participating in a more dynamic and integrated ecosystem.
As the industry continues to evolve, innovations like the DCR Longbox will help define the future of securities finance—bridging legacy infrastructure with next-generation capabilities to deliver real, measurable value.
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