March 1, 2018 (New York/London) Financial technology innovator HQLAX, together with Credit Suisse and ING, have completed the first live securities lending transaction settled using R3’s Corda blockchain platform.
In the groundbreaking transaction, Credit Suisse and ING swapped baskets of securities of value EUR 25 million using the HQLAx Corda-based collateral lending application.
During the transaction, Credit Suisse and ING agreed to transfer legal ownership of Dutch and German government securities on the platform using HQLAx Digital Collateral Records (DCRs) while the underlying securities remained static within unique DCR-linked custody accounts held by Credit Suisse and ING at Credit Suisse (Switzerland) Ltd.
The use of DCRs to effect transfers of securities can ultimately help enhance regulatory transparency, mitigate systemic risk, reduce operational risk, and help financial institutions manage capital more efficiently. This new milestone brings the HQLAX collateral lending application on Corda, known as a CorDapp, one step closer to production.
In a traditional settlement of a securities lending transaction, individual underlying securities are transferred between accounts. However, the intent of the operating model for the HQLAX collateral lending application is to achieve a legal title transfer of baskets of securities through the transfer of ownership of the unique DCR-linked accounts themselves. Clifford Chance were integral in helping to develop the legal architecture for transferring ownership of securities in this way using R3’s Corda blockchain platform.
Romain Dumas, Head of Rates Repo and Collateral Optimization at Credit Suisse Securities (Europe) Limited, said, “The success of this first live transaction speaks to the potential for blockchain technology to help improve collateral fluidity by creating a more efficient, transparent, and cost effective marketplace for liquidity transfers.”
Paolo Muzzarelli, Head of Transaction Banking Products within Financial Institutions at Credit Suisse (Switzerland) Ltd., commented, “As a provider of Transaction Banking services, it is of paramount importance to engage in technological change to understand and anticipate the future needs of our sophisticated client base.”
Ivar Wiersma, Head of Wholesale Banking innovation at ING, commented, “This transaction proves the progress we are making towards deploying Distributed Ledger Technology for the benefit of our clients and society by making the financial industry more efficient and more resilient. With this strong group of participants, together with ING’s technical contribution, I’m confident about the path to production of the HQLAx platform.”
Guido Stroemer, CEO of HQLAᵡ, commented, “HQLAᵡ is very fortunate to have the strong support of the banks active in our platform design and build. In particular, I would like to thank Credit Suisse and ING for their enthusiastic participation in this meaningful pilot transaction, which is a significant step towards helping market participants exchange collateral more efficiently using the HQLAᵡ platform.”
David E. Rutter, CEO of R3, commented, “Collateral lending is a great example of a process that can be revolutionised by blockchain technology, and this live trade between two major global banks marks a significant milestone for the market. We look forward to continuing our work with HQLAᵡ and the banks to establish Corda as the de facto platform for high quality liquid asset management.”
Jeremy Walter, Partner, and Peter Chapman, Fintech Co-Lead, at Clifford Chance commented, “We have been delighted to help develop the HQLAx collateral lending solution and support the continued technological evolution of the securities lending market.”
Clifford Chance is one of the world’s pre-eminent law firms with significant depth and range of resources across five continents. As a single, fully integrated, global partnership, we pride ourselves on our approachable, collegiate and team based way of working. We always strive to exceed the expectations of our clients, which include corporates from all the commercial and industrial sectors, governments, regulators, trade bodies and not for profit organisations. We provide them with the highest quality advice and legal insight, which combines the firm’s global standards with in-depth local expertise. Further information can be found at www.cliffordchance.com.
Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to in this paragraph only as ‘Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,840 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
HQLAᵡ is a financial technology innovation firm that specializes in delivering liquidity management and collateral management solutions for institutional clients in the global securities lending and repo markets. Learn more at www.hqla-x.com
ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. The purpose of ING Bank is empowering people to stay a step ahead in life and in business. ING Bank’s more than 51,000 employees offer retail and wholesale banking services to customers in over 40 countries.
ING Group shares are listed on the exchanges of Amsterdam (INGA AS, INGA.AS), Brussels and on the New York Stock Exchange (ADRs: ING US, ING.N).
Sustainability forms an integral part of ING’s strategy, which is evidenced by the top 10 position among 395 banks ranked by Sustainalytics. ING Group shares are being included in the FTSE4Good index and in the Dow Jones Sustainability Index (Europe and World) where ING is among the leaders in the Banks industry group. For more information visit www.ing.com or visit us on Twitter or LinkedIn.
R3 is an enterprise software firm working with a network of over 200 banks, financial institutions, regulators, trade associations, professional services firms and technology companies to develop on Corda, its blockchain platform designed specifically for businesses.
R3’s global team of over 140 professionals in nine countries is supported by over 2,000 technology, financial, and legal experts drawn from its global member base. R3 is backed by investment of USD 107 million from over 40 firms
Corda is the outcome of over two years of intense research and development by R3 and its members and meets the highest standards of the banking industry, yet is applicable to any commercial scenario. It records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce. Learn more at www.r3.com.
+44 (0)20 7006 5695
+44 (0)20 7006 1896
+1 (212) 325-8226
+41 44 333 47 84
+44 20 71131477
Carolien van der Giessen
+31 20 576 63 86
Nick Warren/Nick Murray-Leslie
+44 (0)207 440 9780
+1 929 329 1550
 The Credit Suisse entity that entered into this transaction was Credit Suisse Securities (Europe) Limited. Unless otherwise specified, references to “Credit Suisse” within the main body of this press release refer to this particular entity.