Dutch bank ING has made an investment into HQLAx, the newly launched collateral mobility system using distributed ledger technology (DLT). The Blockchain-based securities lending platform helps improve collateral fluidity by creating a new, efficient, transparent, and more cost-effective marketplace for liquidity transfers.
In March 2018, ING’s blockchain team developed the initial version of the HQLAx application and together with Credit Suisse was the first to execute a live collateral swap with full legal exchange of contracts and settlement.
In December 2019, the securities lending platform went live with help from the ING blockchain team and has also already seen action by executing its first commercial live transaction with Commerzbank, Credit Suisse and UBS.
The initial live securities trade on a blockchain platform saw an exchange of €25 million of high-quality liquid assets with Credit Suisse using the collateral lending application of HQLAx. This demonstrated a more powerful transaction as in a traditional settlement of a securities lending transaction, individual underlying securities are transferred between accounts.
“The successful commercial launch of HQLAx is a big milestone for the implementation of blockchain in the securities lending market and proof that blockchain can bring tangible benefits to the industry,” said Mariana Gomez de la Villa, head of ING’s blockchain team.
“HQLAx enables market participants to redistribute their collateral by exchanging the ownership of tokenised securities on Corda’s blockchain platform, which no longer requires the underlying securities to move across users. This removes settlement barriers and improves collateral fluidity, which in turn allows users to manage their liquidities easier, faster and more efficiently,” added Gomez de la Villa.
Nick Short, COO of HQLax, describes the platform as “facilitating more efficient collateral management of both high-quality liquid assets via a four-layer operating model.”
He added that “The digital collateral registry layer enables delivery-versus-delivery (DvD) ownership transfers of baskets of securities via digital collateral records (DCRs). This eliminates the current, operationally onerous, requirement to move securities from one custody location to another. We make this possible via integration with the leading Eurex Repo F7-trading system where Hqlax platform transactions are executed, and a Deutsche Börse-owned Trusted Third Party (TTP) entity, which connects the custodians/tri-party agents to the digital collateral registry.”
Short also indicated that HQLax plans to target institutional clientsexclusively, and that they have no current plans for the retail market.