The Depository Trust & Clearing Corporation (DTCC) has advanced to the testing phase of its ground-breaking project to re-platform its credit derivatives Trade Information Warehouse (TIW) on distributed ledger technology (DLT) and cloud.
In this phase, 15 of the world’s largest global banks are conducting end-to-end, structured user acceptance tests, leveraging simulated use cases and test data and validating the interaction between systems, firms and other key market infrastructure providers, including MarkitSERV and its new platform for credit, TradeServ. Upon successful completion, DTCC expects to move to an “open” testing phase by the end of the year, when other market participants and service providers will have the opportunity to test. Testing is anticipated to be completed by Q1 2019 with go live scheduled thereafter, according to DTCC.
“The transformation of DTCC’s Trade Information Warehouse using distributed ledger and cloud technology, along with the modernization of MarkitSERV’s confirmation system, is truly a ground-breaking effort pushing the boundaries of technology use in the industry,” said Chris Childs, CEO of DTCC DerivSERV. “We are proud to be collaborating with a number of the world’s leading banks, MarkitSERV and all our partners on this exciting initiative to revolutionize the derivative industry’s credit market infrastructure. We look forward to launching the service next year.”
“We are pleased to be working with DTCC, our partners and colleagues on this exciting project to bring distributed ledger technology to life in a demonstrable way that will enhance efficiencies and lower costs and risks for the industry,” added Lee Braine from the Chief Technology Office at Barclays.
Since selecting the consortium of IBM, Axoni, and R3, DTCC and its partners have completely recoded the functionality of the TIW, utilizing DLT and the cloud in only 18 months. IBM is leading the initiative by providing program management, DLT expertise, and integration services. Axoni provides the distributed ledger infrastructure and smart contract applications built on the AxCore blockchain protocol, with R3 acting as a solution advisor.
The TIW serves as the golden record for bilateral credit derivatives, performing lifecycle events, payment calculations and settlement through CLS. Additionally, it includes cleared derivative positions from ICE, the Japan Securities Clearing Corporation (JSCC) and LCH SA’s CDSClear, providing market transparency through its public reporting across both cleared and uncleared transactions.
Analysts say the standardized nature of the process flows and data models made credit derivatives an ideal test case for distributed ledger technology. Bolstered by common data standards and governance, a DLT-based TIW service will enable the industry to process and report to regulators from the same data record.