Broadridge Financial Solutions has completed a blockchain pilot with two French banks aimed at recording the details of bilateral repurchase, or repo, agreements.
The U.S.-based investor services firm worked with Natixis and Societe Generale on the pilot, which Broadridge said had demonstrated a distributed ledger's benefits for this kind of transaction. Specifically, those benefits include less manual intervention, reduced risk, greater transparency and faster processing, Broadridge said.
"Within the bilateral repo market, blockchain has shown that it can play an instrumental role in reducing operational cost and complexity," Vijay Mayadas, president of global fixed income and analytics at Broadridge, said in a statement.
The company said that a private blockchain was used, based on the Hyperledger Fabric 1.0 codebase.
Repos are a form of secured short-term financing in which the borrower, typically a brokerage firm, sells securities (usually government bonds) to an investors and agrees to buy them back at a specified date and price. In bilateral repos, the parties are responsible for settling the transaction, rather than relying on a central counterparty.
While that may sound arcane, the market for repos is a significant one, with a notional amount outstanding of $2.3 trillion, according to the Securities Industry and Financial Markets Association. And Broadridge indicated it plans to do more with the technology in this area.
The trial's success "lays the foundation for the development of broader collateral management solutions on blockchain," said Jerry Friedhoff, head of Broadridge’s securities finance and collateral management group.
Broadridge has been actively testing out other use cases for blockchains in financial markets.
Earlier this year, the company took part in a blockchain pilot focused on proxy voting, in partnership with JPMorgan Chase, Northern Trust and Banco Santander. That test used a private version of ethereum as a basis.
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