THE POC DEMONSTRATED: S eamless integration of DLT margin calls and DLT deposits/withdrawals:
Existing Process: Currently, the workflows for distributing margin calls from CCPs and posting margin to CCPs are disparate, resulting in redundant matching/reconciliation processes and errors across markets. Moreover, a single CCP can issue multiple margin calls in a day, generating numerous records for each product, account, margin type, and cycle. Clearing members (sell-side institutions) must manage these with various CCPs on behalf of their buy-side clients worldwide. What the PoC demonstrated: Connecting margin calls and deposits through smart contracts and tokenized collateral created a seamless process among CCPs, clearing members, and buy-side clients, greatly enhancing efficiency and reduce manual processing. S mart contracts to automate business processes reduced operational risks and inefficiencies across all layers – CCP, sell-side (clearing members) and buy-side: Existing process: In CCP-cleared derivatives markets, sell-side and buy-side collateral must be deposited into CCPs regularly. The workflows amongst CCPs and their clearing members (sell-side) is a separate process from the workflow between sell-side and buy-side. Therefore, collateral from the buy-side must be passed via sell-side bank accounts/systems/networks and deposited finally into the CCP’s collateral account. This relay process leads to significant inefficiencies and operational risks. What the PoC demonstrated: Smart contracts to automate business workflows and enable movement of digital assets can not only increase STP/automation in the end-to-end process but also increase optionality for institutions involved. For example, they can enable “synthetic” direct deposits from buy-side clients to CCPs with logical approval by sell-side institutions. This can significantly enhance collateral mobility and liquidity, even when institutions are in different time zones, which can lead to significant capital efficiencies for Clearing Members, while reducing operational risks. S hared smart contracts/applications standardized across three-layers: Existing process: Each CCP offers collateral management (margin call, deposit, withdrawal) to its members. Clearing Members provide similar services to their buy-side clients, interacting with multiple CCPs globally. Buy- side institutions often use multiple Clearing Members for these services, leading to redundant applications and databases across the three layers. What the PoC demonstrated: Digital assets offer financial markets a chance to rethink the ecosystem design to standardize and automate processes and applications. JSCC’s POC developed and deployed shared applications (smart contracts and UI designed to work for all institutions) on DTCC Digital Launchpad. With on-chain tokens and smart contracts, JSCC could confirm end-to-end scenarios from CCP margin calls to buy-side collateral deposits via clearing members.
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DTCC DIGITAL LAUNCHPAD
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