Distributed ledger trial for repo

The Depository Trust & Clearing Corporation (DTCC) and Digital Asset Holdings today announced plans to develop and test a distributed ledger based solution to manage the clearing and settlement of US Treasury, Agency, and Agency Mortgage-Backed repurchase agreement (repo) transactions.

Repo trades often occur in real time, with the settlement, clearing and netting processes happening in multiple steps. While DTCC’s Fixed Income Clearing Corporation (FICC) provides the matching and verification of the initial “start leg” of the repo, FICC does not currently settle the start leg of same-day starting trades. As a result, the settlement of a same-day repo start leg may occur in real-time outside of FICC. With this project, DTCC and Digital Asset seek to reduce risk and capital requirements for the repo market by enabling FICC to become the settlement counterparty for repo transactions in real-time, thereby allowing additional netting and offsets.

Distributed ledger technology was chosen for this application because of its real-time information sharing capabilities, enabling all parties to the repo trade to view details almost immediately after the trade is executed. This will enable buy- and sell-side firms to agree to repo trade details much more quickly, lowering risks and costs, the partners explain.