On Tuesday, the exchange operator Nasdaq announced that its clearing division, together with the securities service provider ABN Amro Clearing and the financial companies EuroCCP and Euroclear, has developed a blockchain platform for transferring collateral to central counterparties when trading in securities.
The press release says that the platform will help to cover the margin calls (request for additional funds from the broker) through a distributed network of traders, brokers, and intermediaries.
Nasdaq undertook the development of a proof of concept (PoC) for a distributed network, and ABN AMRO Clearing and EuroCCP created an external interface and integrated it into services.
In addition, the clearinghouse Euroclear processed the transfers of collateral, thereby monitoring compliance with regulations and ensuring that the agreement was final.
The current system for processing the transfer of collateral was changed due to the increase in the number of trading hours and the need for centralized clearing of derivatives traded on the over-the-counter market in accordance with the rules for the regulation of the infrastructure of the European financial market (EMIR).
The urgency of the appearance of an effective solution to collateral security of securities has become significant also in connection with the increase in the number of buyers who want to clear their transactions with derivatives. In addition, they have a need to cover margin calls despite working in different time zones.
According to the press release, an innovative solution using proof of concept will allow market participants “to cover margin calls within a few minutes”.
“This decision will allow us to provide protection from the risks of counterparties in transactions with shares during off-hours while reducing the complexity of the operation,”
explained Diana Chan, Executive Director of EuroCCP.
