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Deutsche Börse's clearing house Eurex Clearing has received regulatory approval to implement a blockchain-based collateral management system, marking a significant step towards modernising how financial institutions could manage securities used as trading collateral.
The German regulator BaFin has given non-objection status to the initiative, which aims to launch in the second quarter of 2025. The system will use distributed ledger technology (DLT) provided by HQLAX to allow clearing members to move securities collateral more efficiently when meeting margin requirements at the central counterparty (CCP).
J.P. Morgan will serve as the pilot clearing member for the project, which involves collaboration with Clearstream, Deutsche Börse's settlement and custody arm. The system will enable banks to mobilise collateral held across different custodians and central securities depositories using HQLAX's digital ledger, while the actual securities will remain in custody at Clearstream Banking S.A.
Helen Gordon, Global Head of Derivatives Clearing at J.P. Morgan, said: "J.P. Morgan early on identified the benefits of using traditional assets in digital form to move cleared derivatives collateral and is pleased to see this regulatory milestone achieved. We look forward to the next phase of implementation and realizing the risk and optimization benefits associated with improved collateral mobility for us and our clients."
The initiative aims to solve a longstanding friction in derivatives markets, where banks often struggle to quickly move securities collateral between different locations to meet urgent margin calls from clearing houses. By tokenising the collateral transfer process while keeping the underlying securities in place, the system could reduce operational costs and settlement times.
Guido Stroemer, Co-founder and CEO of HQLAX, commented: "We are pleased to support Eurex Clearing in this pioneering initiative, which leverages our DLT platform to enhance collateral mobility and security for cleared margin."
The project represents an expansion of Deutsche Börse Group's blockchain strategy, building on existing work between Clearstream and HQLAX. Marton Szigeti, Head of Collateral, Lending & Liquidity Solutions at Clearstream, said: "We are thrilled that our colleagues from Eurex Clearing add the central clearing element to HQLAX's collateral offering, further strengthening Deutsche Börse Group's engagement. This collaboration underscores Clearstream's commitment to providing efficient collateral solutions, shaping a secure digital financial landscape."
Matthias Graulich, Member of the Executive Board at Eurex Clearing, added: “With this offering Eurex Clearing once again pioneers and upholds its status as the innovator in the CCP space. Eurex Clearing continues to invest in such advanced services, reflecting its commitment to providing cutting-edge solutions and services to its clients.”
