Four members of the ‘Liquidity Alliance’, an international group of central securities depositories, are cooperating with Deutsche Börse to launch an initiative leveraging blockchain technology to ease cross-border mobilisation of security collateral. With the planned solution, The Canadian Depository for Securities Limited, Clearstream, Strate and VPS want to overcome existing hurdles when moving collateral across various jurisdictions, resulting in faster and more efficient transfers.
Following the financial crisis, regulators increasingly require market participants to provide collateral to mitigate risks in the financial system. The Dodd-Frank Act in the U.S. and EMIR in the EU are two important frameworks in this regulatory overhaul leading to a growing demand for high-quality collateral to which access is limited. Central securities depositories are already supporting the market with real-time collateral management to ensure that exposures can be covered sufficiently and that local collateral can be quickly transferred where it is needed.