$11 Trillion Bet: DTCC to Clear Derivatives With Blockchain Tech
The Depository Trust & Clearing Corporation (DCTT) has selected a series of firms to help integrate distributed ledger technology into its first large-scale, real-world application.
In the single, complex deal involving a distributed ledger consortium, a stock exchange, a tech startup, a legacy computer firm and an international collection of bulge bracket banks, the post-trade financial services company has begun the process of moving a significant part of its $1.5qn-worth of transaction workflow to a distributed ledger network.
With a contract announced today, IBM will help manage the process of moving $11tn worth of credit derivatives to a custom distributed ledger built by VC-backed startup, Axoni, under the advisement of banking consortium R3CEV.
The CEO of the DTCC's derivatives service subsidiary, Chris Childs, explained to CoinDesk how a network of nodes run by the counterparties of a transaction will be linked together to not only streamline post-trade processes, but save money as well.
Over the course of the next year, the partners will work collaboratively to "re-platform" the DTCC's existing Trade Information Warehouse (TIW) for post-trade processing to a distributed ledger custom-built for cleared and bilateral credit derivatives.
For an idea of the scale of this operation, the TIW covers all major global derivatives dealers and 2,500 buy-side firms in 70 countries, according to DTCC data.
The DTCC hasn't shared the exact amount of money it believes could be saved by moving the transactions to a blockchain or distributed ledger, but a 2015 report by Santander estimated the global savings to banks more generally speaking could be as high as $20bn a year.
If this first large-scale implementation of a distributed ledger proves successful, theres plenty of room to expand. The entire global credit derivatives market in 2016 was $544tn, according to the Bank for International Settlements, much of which is processed by the DTCC.