An innovative market solution to mobilise collateral

Reduction in intraday liquidity requirements

Scalable for future digitised assets

Reduction in fails

Regulatory transparency and risk compression post-default

Reduction in intraday credit exposures

Inter-operability across custodians

Transfer of ownership/pledge at precise times during the day

HQLAᵡ is a financial technology innovation firm that leverages R3’s distributed ledger technology, Corda, to provide liquidity management and collateral management solutions for institutional clients in the global securities financing markets.

HQLAᵡ and Deutsche Börse Group formed a strategic partnership for the creation of a joint operating model that provides market participants with improved collateral mobility across a fragmented securities settlement eco-system.

In the HQLAᵡ / Deutsche Börse Group operating model, there is no movement of securities between custodians. Instead, a digital collateral registry is used to record ownership of baskets of securities, whilst the underlying securities remain static in the custody location of the collateral giver. This enables platform participants to seamlessly execute capital efficient securities lending transactions for enhanced balance sheet optimization.

Use-Cases

LCR Management

Collateral upgrade transactions, evergreen / extendible maturities

Intra-day Liquidity Management

Transfer of ownership of baskets of securities intraday DvD

Margin Pledge

Pledge baskets of securities real-time

Funding

Mobilise hard-to-move assets

Benefits

Transfer of ownership/pledge at precise times during the day

Regulatory transparency and risk compression post-default

Reduction in intraday liquidity requirements

Reduction in intraday credit exposures

Scalable for future digitised assets

Inter-operability across custodians

Reduction in fails

Why now?

‍Banks are facing increasing regulatory requirements for liquidity and capital, which are pressuring their earnings; there is a clear market need for a platform that can source and monetise liquidity efficiently, effectively, and transparently.

New Technology

Today

The current collateral upgrade market relies on collateral to be managed across a fragmented custody network.
Settlement of transactions occurs at unspecified times during settlement windows
Current market practice is to settle collateral upgrade transactions either by:
• Two Free of Payment (FoP) deliveries, or
• Two Delivery versus Payment (DvP) settlements
Both settlement practices consume costly bank capital. The former consumes intraday credit due to timing and mismatches of unsynchronised (FoP) deliveries, and the latter consumes intraday liquidity due to the cash payment legs of (DvP) settlements.

New Efficiencies

Tomorrow

HQLAᵡ uses new technology in an innovative way to enhance collateral mobility across the existing custodian/triparty landscape.
The HQLAᵡ operating model leverages distributed ledger technology to enable atomic Delivery verses Delivery (DvD) for baskets of securities residing at multiple custodians.
DvD reduces consumption of intraday credit and intraday liquidity, thereby providing capital savings.
Not only a date but also a time is specified for the start leg and end leg of a transaction.
HQLAᵡ could ultimately be used to enhance regulatory transparency over collateral chains, and potentially facilitate risk compression solutions for post default scenarios.
Initial roll-out in Europe, longer term strategy is to expand to APAC and US.

Latest news

Commerzbank, Credit Suisse and UBS execute first live transactions on the Deutsche Börse - HQLAᵡ securities lending platform

December 3, 2019

Deutsche Börse and HQLAˣ successfully launched their jointly developed Distributed Ledger Technology (DLT) solution for frictionless collateral swaps in the securities lending market. The live transactions were executed by Commerzbank, Credit Suisse and UBS on the Eurex Repo F7-trading system.

HQLAᵡ successfully facilitates multiple simulation transactions by market participants ahead of launching its blockchain securities lending solution

September 24, 2019

As part of these simulation transactions, ownership of baskets of securities residing at Clearstream Banking S.A. and Euroclear Bank were exchanged without the need for securities to be moved across the Bridge, the long-established electronic communications platform to transmit securities between these two institutions. In addition, J.P. Morgan have commenced the on-boarding of the Deutsche Börse Group owned Trusted Third Party (TTP) entity as a Collateral Receiver and Collateral Account owner, in the J.P. Morgan Tri-party programme. Advanced discussions are underway with additional leading custodians and tri-party agents.

HQLAᵡ recognised as one of Europe’s hottest fintech companies in 2019’s FinTech50 list

September 19, 2019

HQLAˣ has been included in The FinTech50, the first list in the world to recognise innovative European fintechs. The list includes Monzo, Revolut and N26 among the others.