DekaBank and Metzler conduct real-time securities lending transaction using blockchain technology

The transaction was carried out on Deka’s digital securities platform SWIAT which reduces counterparty risks and coordination effort between trading parties.

By Wesley Bray

DekaBank, the central provider of asset management and capital market solutions for German savings banks, and Metzler Bank have successfully carried out a securities lending transaction without advanced collateralisation, the first time this has occurred.

The transaction was processed using Deka’s digital securities platform SWIAT (Secure Worldwide Interbank Asset Transfer) with technological support from German-based software and consulting company, Comyno.

SWIAT is blockchain-based platform allowing for transactions in real time.

According to DekaBank, if both trading partners are in possession of the securities in question, a “delivery vs. delivery” trade can take place and the usual hedging is no longer necessary. Counterparty risks and coordination effort is thus reduced between the trading parties.

“For such securities transactions, trade and settlement now fall on almost the same point in time. This poses an enormous advantage over the status quo and points out technical possibilities for the future,” said Andreas Tanneberger, head of fixed income trading at Metzler Capital Markets.

Through the use of SWIAT, transfers between custodian banks take place directly without moving securities at CSD account level.

Tokenisation is not required for transfers to take place and the traditional chains of custody at the respective institutions do not need to be adapted. Deka’s platform uses participating institutions’ existing processes and mechanisms and can be integrated into existing infrastructures.

“With the possibility of ‘delivery vs. delivery’ trading, the lending market becomes much more attractive for new and existing market players alike,” said Michael Cyrus, head of money/forex and repo/lending at Deka.

“This transaction represents another milestone in the development of a fully digitised, blockchain-based ecosystem for the financial markets.”