Wall Street clearinghouse puts Bitcoin technology to good use
The Depository Trust and Clearing Corporation, a firm which offers back-end trading services to countless Wall Street companies, announced plans to replace one of its central databases with a distributed ledger technology (DLT) framework. The project will not use Bitcoin’s blockchain —instead, it is building a distributed ledger which will be open exclusively to invited parties.
Six months ago, the World Economic Forum released a report in which it claimed that blockchain will play a central role in the global financial system; now Wall Street seems to be jumping on the blockchain bandwagon. The Depository Trust and Clearing Corporation (D.T.C.C.) the firm which offers back-end trading services to countless Wall Street companies, announced on January 9 that it will “re-platform its Trade Information Warehouse (TIW), building a derivatives distributed ledger solution for post-trade processing based on existing TIW capabilities and interfaces with technology providers and market participants.The TIW service currently automates the record keeping, lifecycle events, and payment management for more than $11 trillion of cleared and bilateral credit derivatives.”
IBM is set to lead the initiative, provide program management, DLT expertise, and integration services, and offer the solution-as-a-service. The distributed ledger infrastructure and smart contract applications will be provided by Axoni, with R3, a consulting firm which works with many banks on blockchain-related project, acting as a solution advisor. Development is expected to begin in January 2017 and the project should go live in early 2018.
The DTCC sets the wheels in motion
Michael C. Bodson, the chief executive of the D.T.C.C, told The New York Times in an interview that the decision to replace the TIW with a distributed ledger technology (DLT) framework represents “a real tangible step into what could be a very different future for Wall Street.” Greg Schvey, CEO of Axoni, opined that “deploying distributed ledger technology in production at this scale is a watershed moment for the industry.”
The idea of blockchain has been particularly interesting for Wall Street given the fact that information is recorded in real time. DTCC is also pursuing additional proof-of-concepts (POCs) and opportunities for leveraging DLT to further enhance the post-trade process. According to Mr Bodson, if the initiative was successful, the firm could use the DLT to move money.
The ledger (the DTCC will not be using Bitcoin’s technology) will allow DTCC and its clients to “further streamline, automate and reduce the cost of derivatives processing across the industry by eliminating the need for disjointed, redundant processing capabilities and the associated reconciliation costs.”
The solution will be deployed through a number of phases, with an end-state vision to establish a permissioned distributed ledger network for derivatives, governed by industry-owned DTCC, with peer nodes at participating firms.
The DLT will be open exclusively to invited parties.