Wall Street's largest securities service platform brings blockchain technology to the CDS market

[Original article from 51CTO.com] According to Bloomberg, the Depository Trust & Clearing Corporation (DTCC), which is also the back-end processing service of Wall Street, has begun to try to use blockchain technology to upgrade the processing of credit default swaps (CDS).

DTCC is responsible for the settlement and clearing of stock and bond transactions across the United States. DTCC's system manages $11.7 trillion in outstanding credit swaps. DTCC said it is trying to reduce redundancy and reduce system costs. IBM and blockchain startups R3 and Axoni will help DTCC build a unified network for user credit swaps.

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In fact, Wall Street has been looking to adopt distributed ledger technology in recent years, hoping to reduce costs by speeding up the settlement time of securities and derivatives.

Although transactions are currently processed electronically, banks and fund managers keep transaction details in their own private databases. This means that details must be checked between different users, which is time-consuming, labor-intensive and prone to errors. Distributed ledger technology allows all users to share the same accurate data, allowing confirmation, payment and other processing to be completed in seconds.

The efficiency gains brought by distributed ledger technology have attracted the attention of Wall Street executives. The new technology greatly reduces the amount of capital that needs to be set aside before a transaction is settled. In addition to the financial industry, industries such as healthcare, supply chain management and mining are also experimenting with distributed ledger technology to improve efficiency.

DTCC plans to use distributed ledger technology to manage all payments and regulatory activities. Barclays, JPMorgan Chase, UBS, Intercontinental Exchange and IHS Markit are also expected to join.

Note: Credit Default Swap (CDS), also known as loan default insurance, is the most widely traded over-the-counter credit derivative in the world. The emergence of credit default swaps solves the liquidity problem of credit risk, allowing credit risk to be traded like market risk, thereby transferring the risk of the guarantor, and also reducing the difficulty and cost of corporate bond issuance.

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