Successful CDS test marks blockchain progress

Seven firms have reported a successful test of blockchain and smart contract technology for standard North American credit default swaps (CDS).

Financial institutions Bank of America Merrill Lynch, Citi, Credit Suisse and J.P. Morgan along with the DTCC and Markit completed the multi-month project in collaboration with distributed ledger technology firm Axoni.

During the test, Markit formulated smart contracts from CDS trade confirmations creating a synchronised record on the network. Included within the smart contracts were economic terms as well as logic to manage permissions and event processing.

Following 85 test cases in early March testing lifecycle, functionality, integration with current systems, resiliency and privacy, the results indicated a 100% success rate across all tests.

“Blockchain and distributed ledger technology has the potential to revolutionize highly manual, complex processes across global financial markets,” said Chris Childs, CEO, DTCC Deriv/SERV.

“This test reinforces that collaboration among service providers will be critical to ensuring the technology is harnessed, assessed and implemented consistently.”

Emmanuel Aidoo who leads Blockchain and Distributed Ledger Function at Credit Suisse said, “our experiments with Axoni demonstrate that confidentially and privacy can be preserved between bilateral parties on an immutable distributed ledger at scale.”