Clearstream in advanced discussion with global custodians over blockchain securities lending platform

Clearstream's Philippe Seyll explained the taking-off point for the HQLAx platform will be to onboard a major player with tri-party capabilities.

By Joe Parsons

Clearstream is in advanced talks to onboard at least one global custodian onto an upcoming tokenised collateral mobility system for high quality liquid assets (HQLA).

Clearstream is one of the main backers for HQLAx, a securities lending platform using R3’s blockchain technology, that allows collateral to become tokenised and held by a custodian without physically moving.

Speaking to Global Custodian on the side-lines of Sibos 2018 in Sydney, Philippe Seyll, co-CEO of Clearstream Banking, explained the taking-off point for the platform will be to onboard a major player with tri-party capabilities.

“There has to be more than one custodian with a tri-party capability operating on HQLAx. We are in advanced discussions with two global custodians of potentially onboarding them onto the platform,” said Seyll.

“We are planning to be ready with HQLAx by the end of the year, and could see the first live transaction between a global custodian take place in the first quarter of next year.”

Those global custodians that have a tri-party offering include BNP Paribas Securities Services, BNY Mellon, and JP Morgan.

Seyll did not confirm which banks the discussions are with.

The HQLAx platform has already seen a successful securities lending transaction on the platform at the start of March between Credit Suisse and ING.

Speaking at Sibos 2018, CEO and founder of HQLAx, Guido Stroemer, said the solution will address the approximate €54 billion of costs currently associated with mobilising high-quality collateral, and an estimated excess of €2.7 trillion.

Stroemer added that the service would be targeting the top 100 banks, and emphasised that having custodians onboard will be crucial.

However, there are many financial institutions that fear they could become dis-intermediated by the technology and will no longer be needed in the collateral exchanging process.

“A revolution could take place when the token would no longer be a proxy of the asset – it will become an asset itself,” added Seyll.

“When the asset becomes a token, it is issued and exchanged directly through blockchain technology, and therefore could potentially take the custodian out of the traditional intermediary role.”