Eleven companies, among them US banking giants Goldman Sachs and JPMorgan Chase, announced on Monday the successful completion of a blockchain-based experiment to manage equity swaps.
Led by blockchain firm Axoni, the pilot test lasted for six months. It monitored swap transaction aspects such as amendment and termination of operations, stock splits, and dividends. The company announced that the trial achieved a success rate of 100%.
Besides the US banks mentioned, the project included BNP Paribas, Credit Suisse, Citigroup, and the Canada Pension Plan Investment Board. Information service providers Thomson Reuters and IHS Markit also took part. The pilot was conducted on AxCore, the blockchain software provided by Axoni.
Axoni CEO Greg Schvey said:
“We’re on a path to take this forward. We know the thing works now.”
“Equity swap data is infamously complex and difficult to manage, making it a terrific fit for distributed ledger technology. We're delighted to have reached another key milestone alongside our partners on this project and grateful for their collaborative efforts to demonstrate how powerful this tech can be,” he added.
Some of the successfully completed tasks related to the transaction speed, security, and transparency of operations. The banks and asset managers involved have joined a network that shares a blockchain-based ledger, which allows almost real-time processing.
Adam Herrmann, who runs Citigroup’s global prime finance business, commented:
“Citi is pleased with the results of another successful equity swap pilot with Axoni. The contribution from investment managers to this effort signifies AxCore's potential to add value end-to-end. Fewer valuation disputes, less reconciliation and real-time access to data would benefit all of the industry.”
Besides the functions mentioned, the project also monitored trade creation, position building, reporting, swap aging, and private key management.
Rana Yared, managing director at Goldman Sachs Principal Strategic Investments, said:
“The equity swap pilot demonstrates the benefits of collaborating with innovative tech startups like Axoni and our industry peers to embrace new technology solutions that can contribute to commercial outcomes and operational efficiencies.”
The pilot dealt with over 70 test cases to monitor lifecycle functionality and integration with systems like Thomson Reuter’s market data and the SwapOne platform provided by IHS Markit.
Tim Baker, global innovation chief at Thomson Reuters, commented on the results: “The seamless integration of market data is critical to the success of this and similar projects and we have been impressed with the solution that has resulted. We look forward to helping the project move to the next phase.”
JP Morgan is working in parallel on a blockchain project with two other banks under the newly formed Interbank Information Network (IIN) - an initiative aimed at improving payment processing.