The Depository Trust & Clearing Corporation (DTCC) announced this week they have successfully completed a proof-of-concept via distributed ledger technology (DLT), which better manages the netting process for the United States Treasury and Agency repurchase agreement transactions.
DTCC worked with Digital Asset, a developer of financial institution DLT solutions to produce what they say is the first successful netting of “start” leg repo transactions with prior end-of-day net securities obligations in the DTCC environment.
The next step sees the two parties form a stakeholder working group with repo and related transaction market participants to produce feedback and ensure any solution meets industry needs. That solution will also have to meet DTCC performance and integration needs and the integration needs of member firms. This phase should be complete by June.
DTCC president and CEO Michael Bodson explained the attraction to DLT.
“DLT was chosen because of its real-time information-sharing capabilities, enabling all parties to quickly view repo details after trade execution lowering risks and costs while enabling users to take advantage of the benefits of a central counterparty.”
In a release DTCC said the central counterparty process offers many repo processing benefits and is consistent with accounting processes which increase liquidity and lower risk. It will net both the “start” and “close” leg of same-day settling trades, “further reducing settlement risk and costs to members by allowing additional netting and offsets,” DTCC added.