TECHNOLOGY

Citi and CME Clearing adopt blockchain for collateral management processes

Blockchain-powered platform implemented to reduce costs of back office functions and speed up margin funding times.

By Hayley McDowell hayley.mcdowell@strategic-i.com December 18, 2017 12:07 PM GMT

Citi and CME Clearing have teamed up with Baton Systems to implement a blockchain-based platform as the firms look to reduce costs of back-office functions.

The platform allows banks to view their collateral in their ledgers in real-time and send cash or securities to clearing houses with one-click.

Citi and CME Clearing explained the blockchain software could significantly reduce costs of back-office operations and speed up margin funding times.

Traditionally banks have had to set aside capital as they wait for collateral to be settled, but the platform could see billions of dollars of capital freed up at major institutions.

Stephen Marx, head of futures, clearing, and collateral operations at Citi, explained the new system also automates certain processes to free up time for market participants.

“The technology allows financial institutions to eliminate manual touch points, reduce email traffic an avoid logging into multiple portals,” he said.

“The capabilities in the funding and collateral space create efficiency and improve productivity for our clients.”

Arjun Jayaram, CEO of Baton Systems, added the system can be implemented and is immediately scalable across any financial institution, exchange or clearing house.

“Its beauty is its simplicity, leveraging the most useful elements of blockchain, while introducing interoperability and extensibility to easily fit with existing technology 'rails' and business processes,” he commented.

Blockchain technology has now been widely implemented across financial institutions for various processes and functions. 

Earlier this month, the Australian Stock Exchange confirmed plans to replace its entire post-trade system, including the clearing and settlement of all equity transactions, with blockchain technology.

Dominic Stevens, CEO at ASX, explained at the time the decision to use blockchain would reduce costs for its customers and put Australia at the forefront of innovation in financial markets.