Digital Ledger Technology (DLT) Implemented for Collateral Mobilization by Eurex Clearing

Digital Ledger Technology (DLT) Implemented for Collateral Mobilization by Eurex Clearing

In a groundbreaking development, J.P. Morgan, in collaboration with Dutch pension fund investor PGGM, has successfully executed the world's first live Distributed Ledger Technology (DLT)-based collateral transaction for cleared derivatives initial margin[1][2]. This transaction was facilitated by Eurex Clearing's new DLT-enabled collateral mobilization service.

This historic milestone marks a significant stride in modernizing financial market infrastructure, as it mobilizes securities collateral across custody locations, providing instantaneous access and transfer of collateral assets to meet margin obligations efficiently[1].

The innovative service, a result of collaboration between Eurex Clearing, HQLA, and Clearstream, is set to revolutionize collateral management by offering enhanced collateral mobility, increased operational efficiency, improved transparency and security, and regulatory alignment[1][2][5].

The solution, powered by HQLAx’s DLT platform, streamlines processes, reducing manual interventions and the risk of errors, thereby optimizing the use of collateral and improving liquidity management[1][2]. The digital ledger offers immutable records of transactions, increasing trust and regulatory compliance in collateral management[1][2][5].

Anja Kleefsman, Head of Treasury & Liquidity Management at PGGM, expressed her satisfaction with being part of this first live DLT-based collateral mobilization transaction. PGGM views optimizing collateral management as a key priority, with instant access to and mobilization of collateral assets as a major step forward[2].

J.P. Morgan's involvement in this transaction demonstrates their belief in the potential benefits of DLT for collateral management across the industry. Danny Hand, Prime Financial Services Product Development at J.P. Morgan, expressed his commitment to innovation and belief in DLT's transformative power for collateral management[2].

This service is a key milestone in Eurex Clearing's collateral management strategy and its broader ambitions in digital services. Eurex Clearing is proactively preparing for the digital transformation of the financial industry[2].

PGGM looks forward to the industry's further adoption of this DLT-based solution and leveraging its benefits. The service has the potential to significantly enhance collateral mobility in today's dynamic markets, bringing significant benefits to clients, J.P. Morgan, and the market as it continues to evolve[2].

[1] Eurex Clearing. (2021). Eurex Clearing and HQLAx successfully execute first live DLT-based collateral transaction for cleared derivatives initial margin. [online] Available at: https://www.eurexchange.com/en/news/press-releases/2021/eurex-clearing-and-hqlax-successfully-execute-first-live-dlt-based-collateral-transaction-for-cleared-derivatives-initial-margin-2654007

[2] HQLAx. (2021). HQLAx and Eurex Clearing collaborate on DLT-based collateral management solution. [online] Available at: https://www.hqlax.com/news/hqlax-and-eurex-clearing-collaborate-on-dlt-based-collateral-management-solution

[3] BaFin. (2021). BaFin's non-objection for DLT-based collateral management solution. [online] Available at: https://www.bafin.de/SharedDocs/Publikation/DE/Sektion/Finanzmarktaufsicht/FMI/FMI_Dokumente/2021/2021-03-23-BaFin_DLT_Collateral_Management.html

[4] Clearstream. (2021). Clearstream partners with HQLAx to enable digital collateral management. [online] Available at: https://www.clearstream.com/internet/en/about_us/news/press_releases/2021/clearstream-partners-with-hqlax-to-enable-digital-collateral-management.html

[5] Financial Times. (2021). J.P. Morgan leads first live blockchain-based collateral swap. [online] Available at: https://www.ft.com/content/4963573d-82d4-4e2f-828d-1e19d6a06a98

1. The collaboration between J.P. Morgan, PGGM, Eurex Clearing, HQLAx, and Clearstream has resulted in a technology-driven solution that promises to revolutionize finance, by enhancing collateral mobility, improving operational efficiency, boosting transparency, and increasing security in collateral management, thereby optimizing liquidity management.
2. This innovative service, enabled by Distributed Ledger Technology (DLT), has the potential to significantly transform the financial industry, as it offers immutable records of transactions, promotes regulatory compliance, and offers the industry a key milestone towards achieving digital transformation.

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