By Anna Irrera
NEW YORK, Jan 9 (Reuters) - Post-trade provider theDepository Trust & Clearing Corporation (DTCC) will useblockchain technology this year to rebuild its platform thatprocesses $11 trillion worth of credit default swaps, as WallStreet intensifies efforts to take advantage of the emergingtechnology.
IBM Corp and technology startups Axoni and R3 CEVhave been selected to work on the project which is set tokick-off this month, DTCC said on Monday. It expects the newblockchain-enabled Trade Information Warehouse to go live inearly 2018.
The project is one of the largest implementations of thenascent technology in mainstream financial markets to have beenmade public to date. Blockchain is a shared record oftransactions maintained by a network of computers on theinternet.
The project is being developed with input from marketparticipants and infrastructure providers including Barclays Plc, Citigroup Inc, Credit Suisse Group AG,Deutsche Bank AG, JPMorgan Chase & Co, UBSGroup AG, Wells Fargo & Co, IHS Markit Ltd and Intercontinental Exchange Inc, DTCC said.
Blockchain will reduce the costs and complexity of managingcredit default swaps, which are essentially contracts thatinsure bond-holders against losses if the bond goes bad.
DTCC's platform keeps track of the security throughout thelifecycle of the associated bond. Blockchain can simplify theprocess by automatically maintaining a shared electronic recordof the security which is visible to all relevant parties.
The decision to implement the technology follows a testconducted by DTCC and banks in 2016 which proved some of theadvantages of using blockchain, said Michael Bodson, presidentand chief executive officer of DTCC.
"The test showed that distributed ledger technology couldhandle all the various types of events processing needs forcredit default swaps and it showed that it could be done at alower cost point than what can be done with our existinginfrastructure," Bodson said.
The implementation comes after a year marked by a flurry ofblockchain tests and ambitious announcements from financialinstitutions and technology companies, leading skeptics toquestion whether the technology underpinning cryptocurrencybitcoin was being overhyped.
"The project will prove to the industry that it (blockchain)is a powerful technology that can deliver benefits," Bodsonsaid.
DTCC is also working with New York-based startup DigitalAsset Holdings on developing blockchain-based technology for thesyndicated loans market. (Reporting by Anna Irrera; Editing by Lisa Shumaker)
Barclays (BARC)
