Category: NEWS

Deutsche Börse Group expands partnership with HQLAx by acquiring minority stake

Deutsche Börse strengthens commitment to new technologies in the post-trade sector / Significant progress in creating innovative blockchain solution to tackle fragmentation of securities lending market

Deutsche Börse Group has just made an initial investment of a single-digit euro million amount in HQLAx S.à r.l. in exchange for a minority shareholding. With this step, the company further strengthens its ties with HQLAx, aiming to increase market efficiency in the fragmented securities lending market by leveraging innovative technologies in a collaborative way.

In March, Deutsche Börse Group had announced that together with HQLAx it is building a securities lending solution leveraging the R3 Corda blockchain platform. Over the last five months, significant progress has been made: The on-boarding process with an initial set of banks has been kicked off and detailed discussions with relevant regulatory authorities are taking place. The Group is likely to acquire further shareholdings in HQLAx around year-end.

Deutsche Börse Group and HQLAX partner to build securities lending solution on the R3 Corda blockchain platform

Release date: 26 Mar 2018

Deutsche Börse Group and HQLAX have signed a Letter of Intent to form a strategic partnership for the creation of an innovative securities lending solution using the R3 Corda blockchain platform.

Using Corda’s unique blockchain technology, the partners will build a fully integrated front to back operating model to facilitate more efficient collateral management of high quality liquid assets. These assets are in heightened demand due to the implementation of bank regulations for liquidity, mandatory clearing and margin requirements for OTC derivatives. According to the most recent Basel III Monitoring Report1, the global banking industry reported holdings of €11.95 trillion of high quality liquid assets.

The trading layer will be delivered exclusively by Deutsche Börse’s Eurex Repo platform, which will enable market participants to leverage existing connectivity to the market-leading Eurex Repo service. Deutsche Börse Group will in addition assume a lead role in the custody agnostic, post-trade processing layer, which is designed to interoperate with multiple collateral agents and custodians.

The partnership with Deutsche Börse is expected to foster market adoption by enabling seamless connectivity with HQLAX, for both trade execution and post-trade processing.

The securities lending market has long played an important role in high quality liquid assets portfolio management. However, incumbent operational bottlenecks across a fragmented global securities settlement system impede collateral fluidity, increase costs and risks, and result in sub-optimal financial resource management. In Europe alone, there exist over 40 central securities depositories (CSD).

Addressing these issues, HQLAX will help market participants redistribute collateral liquidity more efficiently, by improving interoperability for pools of securities residing in multiple, disparate settlement systems and locations.

In a traditional settlement of a securities lending transaction, underlying securities are transferred between custody accounts. In the HQLAX operating model, legal title transfer of baskets of securities will be achieved by the transfer of ownership of HQLAX Digital Collateral Records (DCRs) while the underlying securities remain static within unique DCR-linked custody accounts. The use of DCRs to effect transfers of securities will enhance regulatory transparency, mitigate systemic risk, reduce operational risk, and help financial institutions mobilise collateral and manage capital more efficiently.

The strategic partnership between Deutsche Börse Group and HQLAX brings the HQLAX collateral lending solution built on Corda, one step closer to production.

Guido Stroemer, CEO of HQLAX, commented: “Our goal is to mobilise liquidity across pools of collateral currently residing in disparate custody accounts around the globe. Partnering with Deutsche Börse Group enables us to maximise the network effect that will drive widespread adoption of the HQLAX platform. We look forward to further collaboration with the broader community of collateral agents and custodians.”

David Rutter, CEO of R3, added: “Partnering with a market leader like Deutsche Börse Group is a major milestone for HQLAX, and Corda is the perfect choice of platform. It was built from the ground up to enable businesses in complex and often highly regulated markets to overcome real-world challenges like this those associated with securities lending.”

Philippe Seyll, Executive Manager at Deutsche Börse Group, commented: “Jointly with our partners, we will address some of the major issues in today’s securities lending markets through innovate means. With the creation of a neutral custody agnostic control layer, Deutsche Börse is embracing distributed ledger technology and complements it with a neutral and trusted market infrastructure role open to multiple custodians and collateral agents. This way Deutsche Börse supports market participants to deal with the global regulatory framework whilst reaping the benefits of the leading edge distributed ledger technology.”

1  Basel III Monitoring Report (March 2018)

zusatzinformation

Deutsche Börse Group

Deutsche Börse Group is one of the largest exchange organisations worldwide. It organises markets characterised by integrity, transparency and safety for investors who invest capital and for companies that raise capital – markets on which professional traders buy and sell equities, derivatives and other financial instruments according to clear rules and under strict supervision. Deutsche Börse Group, with its services and systems, ensures the functioning of these markets and a level playing field for all participants – worldwide.

HQLAX

HQLAX is a financial technology innovation firm that specializes in delivering liquidity management and collateral management solutions for institutional clients in the global securities lending and repo markets. Learn more at www.hqla-x.com.

R3

R3 is an enterprise software firm working with a network of over 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies to develop on Corda, its blockchain platform designed specifically for businesses.

R3’s global team of over 140 professionals in nine countries is supported by over 2,000 technology, financial, and legal experts drawn from its global member base. R3 is backed by investment of USD 107 million from over 40 firms

Corda is the outcome of over two years of intense research and development by R3 and its members and meets the highest standards of the banking industry, yet is applicable to any commercial scenario. It records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce. Learn more at www.r3.com.

Credit Suisse and ING execute first live transaction using HQLAᵡ securities lending app on R3’s Corda blockchain platform

PRESS RELEASE

March 1, 2018 (New York/London) Financial technology innovator HQLAᵡ, together with Credit Suisse1 and ING, have completed the first live securities lending transaction settled using R3’s Corda blockchain platform.

In the groundbreaking transaction, Credit Suisse and ING swapped baskets of securities of value EUR 25 million using the HQLAx Corda-based collateral lending application.

During the transaction, Credit Suisse and ING agreed to transfer legal ownership of Dutch and German government securities on the platform using HQLAᵡ Digital Collateral Records (DCRs) while the underlying securities remained static within unique DCR-linked custody accounts held by Credit Suisse and ING at Credit Suisse (Switzerland) Ltd.

The use of DCRs to effect transfers of securities can ultimately help enhance regulatory transparency, mitigate systemic risk, reduce operational risk, and help financial institutions manage capital more efficiently. This new milestone brings the HQLAX collateral lending application on Corda, known as a CorDapp, one step closer to production.

In a traditional settlement of a securities lending transaction, individual underlying securities are transferred between accounts. However, the intent of the operating model for the HQLAᵡ collateral lending application is to achieve a legal title transfer of baskets of securities through the transfer of ownership of the unique DCR-linked accounts themselves. Clifford Chance were integral in helping to develop the legal architecture for transferring ownership of securities in this way using R3’s Corda blockchain platform.

Romain Dumas, Head of Rates Repo and Collateral Optimization at Credit Suisse Securities (Europe) Limited, said, “The success of this first live transaction speaks to the potential for blockchain technology to help improve collateral fluidity by creating a more efficient, transparent, and cost effective marketplace for liquidity transfers.”

Paolo Muzzarelli, Head of Transaction Banking Products within Financial Institutions at Credit Suisse (Switzerland) Ltd., commented, “As a provider of Transaction Banking services, it is of paramount importance to engage in technological change to understand and anticipate the future needs of our sophisticated client base.”

Ivar Wiersma, Head of Wholesale Banking innovation at ING, commented, “This transaction proves the progress we are making towards deploying Distributed Ledger Technology for the benefit of our clients and society by making the financial industry more efficient and more resilient. With this strong group of participants, together with ING’s technical contribution, I’m confident about the path to production of the HQLAᵡ platform.”

Guido Stroemer, CEO of HQLAᵡ, commented, “HQLAᵡ is very fortunate to have the strong support of the banks active in our platform design and build. In particular, I would like to thank Credit Suisse and ING for their enthusiastic participation in this meaningful pilot transaction, which is a significant step towards helping market participants exchange collateral more efficiently using the HQLAᵡ platform.”

David E. Rutter, CEO of R3, commented, “Collateral lending is a great example of a process that can be revolutionised by blockchain technology, and this live trade between two major global banks marks a significant milestone for the market. We look forward to continuing our work with HQLAᵡ and the banks to establish Corda as the de facto platform for high quality liquid asset management.”

Jeremy Walter, Partner, and Peter Chapman, Fintech Co-Lead, at Clifford Chance commented, “We have been delighted to help develop the HQLAx collateral lending solution and support the continued technological evolution of the securities lending market.”

Clifford Chance
Clifford Chance is one of the world’s pre-eminent law firms with significant depth and range of resources across five continents. As a single, fully integrated, global partnership, we pride ourselves on our approachable, collegiate and team based way of working. We always strive to exceed the expectations of our clients, which include corporates from all the commercial and industrial sectors, governments, regulators, trade bodies and not for profit organisations. We provide them with the highest quality advice and legal insight, which combines the firm’s global standards with in-depth local expertise. Further information can be found at
www.cliffordchance.com.

Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to in this paragraph only as ‘Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-networth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,840 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.creditsuisse.com.

HQLAᵡ
HQLAᵡ is a financial technology innovation firm that specializes in delivering liquidity management and collateral management solutions for institutional clients in the global securities lending and repo markets. Learn more at www.hqla-x.com

ING
ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. The purpose of ING Bank is empowering people to stay a step ahead in life and in business. ING Bank’s more than 51,000 employees offer retail and wholesale banking services to customers in over 40 countries.

ING Group shares are listed on the exchanges of Amsterdam (INGA AS, INGA.AS), Brussels and on the New York Stock Exchange (ADRs: ING US, ING.N).

Sustainability forms an integral part of ING’s strategy, which is evidenced by the top 10 position among 395 banks ranked by Sustainalytics. ING Group shares are being included in the FTSE4Good index and in the Dow Jones Sustainability Index (Europe and World) where ING is among the leaders in the Banks industry group. For more information visit www.ing.com or visit us on Twitter or LinkedIn.

R3
R3 is an enterprise software firm working with a network of over 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies to develop on Corda, its blockchain platform designed specifically for businesses.

R3’s global team of over 140 professionals in nine countries is supported by over 2,000 technology, financial, and legal experts drawn from its global member base. R3 is backed by investment of USD 107 million from over 40 firms.

Corda is the outcome of over two years of intense research and development by R3 and its members and meets the highest standards of the banking industry, yet is applicable to any commercial scenario. It records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce. Learn more at

www.r3.com.

Press contact:

Clifford Chance
Michael Osborne
+44 (0)20 7006 5695
Michael.Osborne@CliffordChance.com

Peter Chapman
+44 (0)20 7006 1896
Peter.Chapman@CliffordChance.com

Credit Suisse
Candice Sun
+1 (212) 325-8226
candice.sun@credit-suisse.com

Sebastian Kistner
+41 44 333 47 84
sebastian.kistner@credit-suisse.com

HQLAᵡ

Nick Short
+44 20 71131477
nick@hqla-x.com

ING
Carolien van der Giessen
Media Communication
+31 20 576 63 86
carolien.van.der.giessen@ing.com

R3
Nick Warren/Nick Murray-Leslie
Chatsworth Communications
+44 (0)207 440 9780
contact@chatsworthcommunications.com

Charley Cooper
R3
+1 929 329 1550
charley@r3cev.com

 

1  The Credit Suisse entity that entered into this transaction was Credit Suisse Securities (Europe) Limited. Unless otherwise specified, references to “Credit Suisse” within the main  body of this press release refer to this particular entity.

Blockchain set to transform loan trading and collateral markets

By: Peter Lee
Published on: Monday, August 21, 2017

After breakthrough proofs of concept in the spring, two large projects are now quietly moving forward into pilot production that could see blockchain technology transform wholesale markets at the core of the global financial system.

Synaps, a joint venture between Ipreo and Symbiont, used the latter’s smart contact technology in an experiment in the first quarter of the year with a group of 19 banks and asset managers drawn together by Credit Suisse that focused on servicing and settlement in the $1 trillion secondary market for US loans. The syndicated loan market remains a crucial source of funding to many companies, while higher capital regulations have reduced banks appetite to provide loans. The success of this proof of concept has now raised the prospect of three-day settlement bringing many new investors into what has hitherto been regulated as a less-liquid asset class that has traditionally operated on 16- to 20-day settlement times. Emmanuel Aidoo, Credit Suisse Emmanuel Aidoo, head of the distributed ledger and blockchain effort at Credit Suisse, approached many of those 19 participants to discuss various pain points in loan trading over the 12 months leading up to the proof of concept. He gives Euromoney the latest update, saying: “We are working to put a few dozen smaller loan transactions, where we or other participating banks are the agent, onto a distributed ledger platform using smart contracts in production next year.” The motivation is clear. “It will save in operating expenses and also potentially free up capital held against loan exposures on balance sheets,” says Aidoo. To work, any such platform will need many sell-side and buy-side participants. With the distributed ledger technology now proven, most effort is now being devoted to the funding and governance of a network that will eventually compete with Markit and Loan IQ, which dominate US loan secondary trading and servicing today. Aidoo remains confident. Agent banks exert a lot of control in the secondary loan market over where assets trade, where the associated data sits and how customers receive it. And when two organizations trade a loan, they can choose between them where it settles. Credit Suisse believes that the cost for participants in managing on blockchain the whole life-cycle of a syndicated loan from origination through trading to pay-off could fall by up to 50%. Savings might come from reduced trade reconciliation cost through the use of a golden source of books and records, lower fees paid to third-party servicers and elimination of associated jobs handling settlement. While the existing platforms charge $125 per trade, a commercial DLT platform might charge half that with the added benefit of reduced reconciliation checking and clean data delivered in electronic form rather than via fax as it generally still is today. More intriguingly, a three-day settlement window in syndicated loans would reduce the difference between loans and bonds. “Many investors, including mutual funds and institutional asset managers, might be attracted to loans that are senior to bonds in the capital structure, but they are put off by how long loan trades take to settle,” says Aidoo. “Managers of US 401(k) plans, for example, often carry additional cash on the balance sheet against possible redemptions, which need to be settled within a three-day window, creating a drag on the balance sheet. Helping loans get to a T+3 settlement cycle would open the market up to more investors.”

Full article: https://www.euromoney.com/article/b14djmk97srdh5/blockchain-set-to-transform-loan-trading-and-collateral-markets?copyrightInfo=true
Visit https://www.euromoney.com/reprints for additional distribution rights. For more articles like this, follow us @euromoney on Twitter.

Awash in liquidity, banks seek tech solution

AMERICAN BANKER

by Penny Crosman published April 06 2017, 3:23pm EDT

Too much cash. It sounds like a good problem to have.

But for banks, it can be costly to have too much cash sitting around doing nothing. Having too little liquidity can run them afoul with regulators, of course. It’s part of a chief financial officer and treasury department’s job to manage this to a reasonable level.

A technology solution to the liquidity problem is being created by CIBC, Commerzbank, Credit Suisse, ING and UBS, along with the blockchain consortium R3 and the liquidity management software company HQLAX. They are building a distributed ledger specifically for banks to trade highly liquid securities with one another and thus be better able to manage their liquidity ratios.

It’s early days and the bankers’ ambitions are modest so far.

“My hope for this project is that it helps us frame a discussion with custodians, partner banks and regulators that leads us down a pathway to commercialization and to a real platform that allows for a marketplace for real-time transacting,” said Emmanuel Aidoo, head of blockchain and distributed ledger technology strategy at Credit Suisse.

The liquidity problem

In a recent report, the Bank of International Settlements found that financial institutions hold more highly liquid assets to meet short-term obligations than they need to.

“As a result of Basel III regulation, particularly as it relates to the liquidity coverage ratio, banks have done a good job of sourcing liquidity and in many cases now, banks are in a position where they have excess capacity of liquidity,” said Guido Stroemer, CEO of HQLAX.

This puts an onus on the CFO and treasury department of each bank to manage their liquidity ratios to a target, he said.

Liquidity is typically managed through the borrowing and lending of cash and securities.

Stroemer was working in UBS’s treasury department when he perceived a need for a standardized and transparent marketplace for banks and other market participants to transfer liquidity.

“The underlying securities settlement system that we have in place across the globe is quite fragmented, and it’s difficult in this day and age to move securities from one international central securities depository to another,” he said.

Stroemer said he believes that rather than physically transfer cash and securities among one another, banks would be better off keeping all the securities in a secure place, and transferring legal title to them amongst each other.

In the plan for the new ledger, a trusted third party, such as a central securities depository, will use R3’s Corda platform to issue and track receipts (formally called digital collateral receipts) for the securities banks want to trade. The ledger will not store the cash or securities — the trusted third parties will take care of that.

READ COMPLETE ARTICLE HERE:

https://www.americanbanker.com/news/awash-in-liquidity-banks-seek-tech-solution

HQLAX selects Corda for collateral lending solution in collaboration with R3 and five banks

PRESS RELEASE

April 5, 2017 (New York/London/Singapore) – Financial innovation firm R3, five of its members and financial resource management specialist HQLAX have built a collateral lending solution for liquidity transfers on R3’s Corda distributed ledger platform.

Project participants CIBC, Commerzbank, Credit Suisse, ING, UBS and HQLAX collaborated with R3 to develop an operating model for a digital collateral receipt (DCR) lending marketplace. The model was built on R3’s Corda platform, a financial grade distributed ledger that records, executes and manages institutions’ financial agreements in perfect synchrony with their peers.

The project demonstrated the ability to create a digital collateral receipt lending market, designed to achieve the following benefits:

  • Help market participants redistribute liquidity more effectively and more cost efficiently
  • Enhance regulatory transparency of collateral chains
  • Mitigate systemic risk by enabling orderly default unwinds

The five project participants will continue working with R3 and HQLAx to transform the proof-of-concept into a live pilot and subsequent production platform. As part of the flight path from laboratory to production, R3 and HQLAx will engage the regulatory community to showcase the prototype and receive feedback for shaping the production ready platform.

David E.Rutter, CEO of R3, commented: “The implementation of new bank regulations for liquidity, mandatory clearing, and margin requirements for OTC derivatives has caused a significant increase in demand for high quality liquid assets. As a result, there is a heightened need for a marketplace that facilitates large scale, cost efficient collateral transfers across the global financial ecosystem, and Corda exceeded the most demanding requirements.”

Guido Stroemer, CEO of HQLAX, commented: “The collaborative effort and proactive engagement by the project participants was truly impressive, and the value proposition to help shape the target operating model of the HQLAX platform resonated strongly with the bank participants. This project is an excellent example of the R3 business model of testing use cases in its Lab and Research Centre in preparation for production ready deployment.”

Robin Green of CIBC Capital Markets comments: “We are excited to be involved in the development of a novel way to represent and exchange financial assets which has the potential to greatly improve market efficiency and reduce systemic risk. We look forward to taking this concept into the pilot and developing this innovative idea further.”

Thorsten Kanzler, Divisional Board Member Group Treasury at Commerzbank, commented: “The digital collateral receipt lending marketplace is an important step on our way to build up a digital Treasury product range. Once live, the lending place will support Commerzbank’s treasury in managing regulatory requirements even more cost efficient by facilitating collateral transfers on a distributed ledger technology platform. Thereby it allows us to enhance our integrated financial resource management by linking an HQLA exchange to the overall liquidity management of Commerzbank.”

Emmanuel Aidoo, Head of Blockchain and Distributed Ledger Technology Strategy at Credit Suisse, comments: “We made many important discoveries during this experiment – first and foremost was the realization that a blockchain-enabled marketplace for trading digital collateral receipts allows participants to redistribute liquidity more cost effectively and efficiently while enhancing regulatory transparency of collateral chains. This ultimately helps to mitigate systemic risk by enabling orderly default unwinds.”

Ivar Wiersma, Head of Wholesale Banking Innovation at ING, comments: “In line with our culture and our strategy, ING is eager to continue to collaborate and pursue this forward-thinking opportunity to progress HQLAx to a live pilot phase, in line with our ambition to get distributed ledger technology out of the lab, and delivering tangible business value. This solution could provide bank treasurers with a new supply of non-cash collateral and offer more cost efficiency by optimizing balance sheet usage and liquidity management. Also, it can mitigate operational risks associated with securities delivery across fragmented securities systems”.

Gareth Allen, Global Head of Asset Sourcing & Optimization – Group ALM at UBS, comments: “Developing an operating model for a digital collateral receipt lending marketplace has the potential to be of real benefit to market participants. There’s still plenty to do, but collaborating with HQLAx and our peers – through R3 – to explore and drive efficiencies in the HQLA process is the right way to take this project from a proof-of-concept to live pilot, and possibly beyond”

About R3

 R3 is leading a consortium with over 80 of the world’s largest financial institutions to develop ground-breaking commercial applications for the financial services industry that leverage the appropriate elements of distributed and shared ledger technology.

Operating in New York, London and Singapore, the R3 team is made up of financial industry veterans, technologists, and new tech entrepreneurs, bringing together expertise from electronic financial markets, cryptography and digital currencies.

The R3 Lab and Research Centre has quickly become a centre of gravity for collaborative research and testing of distributed and shared-ledger inspired technologies, and is where R3 works with its partners to define, design and deliver the next generation of financial infrastructure.

 

About HQLAX

 HQLAX, a partnership of financial market veterans and R3, is a financial innovation firm that specializes in providing financial resource management solutions to market participants.

 

Press contact

R3:

Nick Warren/Nick Murray-Leslie
Chatsworth Communications
+44 (0)207 440 9780

contact@chatsworthcommunications.com

Charley Cooper
R3
+1 917 855 8529

charley@r3cev.com

DOWNLOAD PRESS RELEASE AS PDF

Project Bravo press release