A group of major financial firms including JPMorgan Chase and Goldman Sachs has trialed the exchange of equity swaps over a distributed ledger (DLT) system.
Using the AxCore distributed ledger platform from startup Axoni, the pilot – which also included BNP Paribas, Credit Suisse and Citi – saw the banks process equity swaps from start to finish, according to an announcement from today. The trial looked at the potential of DLT to streamline the way swaps are made.
By carrying out trades across a network where all parties use the same valuation data and share the same books, in theory, payments can be processed nearly instantaneously and disputes over transactions will be less likely.
Greg Schvey, CEO of Axoni, said in a statement:
“Equity swap data is infamously complex and difficult to manage, making it a terrific fit for distributed ledger technology.”
Following on from a proof-of-concept from late last year, the pilot tested tasks like trade creation, amendments, swap aging and dividends. The pilot also tested factors external to the trades, such as network performance and privacy, although it was conducted entirely a test environment. None of the trades were real and no money changed hands, according to Bloomberg.
Axoni used a standardized data structure for the swaps, built in collaboration with the International Swaps and Derivatives Association (ISDA). The collaborators also put together a governance framework to be used on a production network.
In May, Axoni closed a $20 million Series A round that saw participation from banks such as Citi and investors like Andreessen-Horowitz.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Axoni.
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