Depository Trust & Clearing Corp. (DTCC), a firm at the center of Wall Street’s trading infrastructure, is about to launch an important test of distributed ledger technology: seeing whether it can provide workable solutions for the $2.6 trillion repo market, The Wall Street Journal reports .
DTCC will collaborate with Digital Asset Holdings for planning and running the test. Earlier this year, DTCC participated in a $52 million funding round for Digital Asset Holdings , with other investors including JP Morgan, Citi, Accenture, CME Group and ASX, the company behind Australia’s stock market.
A repurchase agreement (repo) is a form of short-term borrowing for dealers in securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. Repos play a critical role in the financial system by keeping cash and securities circulating among hedge funds, investment banks and other financial firms.
DTCC, established in 1999, focuses on post-trade financial services, providing clearing and settlement services to the financial markets. It provides central custody of securities and ways for buyers and sellers to make their exchanges in a safe and efficient way. In 2011, DTCC settled the vast majority of securities transactions in the United States and close to $1.7 quadrillion in value worldwide, making it by far the highest financial value processor in the world.
In a joint press release , DTCC and Digital Asset Holdings announced plans to develop and test a distributed ledger-based solution to manage the clearing and settlement of U.S. Treasury, agency, and agency mortgage-backed repo transactions. Repo agreements were selected for this proof-of-concept because there is an opportunity to streamline how these products are cleared as repo transaction volumes continue to grow.
“Distributed ledger technology has the potential to revolutionize certain post-trade processes that are inefficient and complex, and […]
