JP Morgan uses blockchain to create intraday liquidity

Darren Sinden

According to JP Morgan, using blockchain technology facilitated instantaneous settlement and maturity of the repo transaction over a period of hours rather than days as would have been the case using existing systems.

DTCC’s ALERT hits six million instructions

Blockchain took a step towards finding a long term application or problem to solve last week as JP Morgan completed a repo trade using an in house version of the technology.

Blockchains came to fame with the emergence of Bitcoin some ten years ago, and the idea of an immutable distributed ledger caught the imagination of the wider finance and fintech sectors outside of cryptocurrencies. However to date, no one has really found a compelling use case for the technology or at least one that offers significant benefits over existing solutions.

JP Morgan has now used its Onyx Blockchain platform to swap and settle a repo trade between US treasury bonds and a JP Morgan digital currency known as JPM Coin.

According to JP Morgan, using blockchain technology facilitated instantaneous settlement and maturity of the repo transaction over a period of hours rather than days as would have been the case using existing systems.

JP Morgan sees the new trading and settlement application as a way to reduce settlement risk but also to free up or create additional intraday liquidity.

Scott Lucas, head of markets distributed ledger technology at JP Morgan said that “The current repo market has some technical inefficiencies, and we identified blockchain technology as a way to reduce our clients’ intraday risk profile.”

Repo, an acronym for ‘sale and repurchase trade’ is used by financial institutions to collateralise trading positions or inventory by effectively swapping their holdings for cash over a fixed time frame before their position, or collateral as its often referred, to has to be repurchased.

The use of repo trades creates balance sheet efficiency and allows the trading desk to fund positions cheaply and to turn their key holdings into cash, as and when required, without effecting an outright sale of the position.

Access to intraday funding could help to reduce a banks capital commitments and thus its cost base, hence the interest in this development.

JP Morgan has also been experimenting with using blockchain technology alongside external counterparties such as Goldman Sachs and BNY Mellon. Goldman’s global head of digital assets Mathew McDermott was quoted as saying that “This is an exciting project which vividly highlights where enterprise blockchain can address a real-world problem in the financial system and we look forward to going live in early 2021,”

We are still some way from seeing blockchain technology adopted as a mainstream settlements system but the fact that that some of worlds largest institutions can see a business case for its deployment takes us one step closer to that point. However, to some extent, the blockchain still looks to be a solution in search of a problem to solve.

Read this next

Institutional FX

CME Group reports solid FX volumes, micro BTC futures average 27K contracts

CME Group (NASDAQ: CME), the holding company for CBOT, NYMEX, and COMEX exchanges, has just released its trading monthly review for November 2021, which showed a mixed performance across the group’s six product lines, according to a CME statement.

Institutional FX

PrimeXM’s volume hits new all-time high at $1.23 trillion

Average daily trading volumes across PrimeXM data center locations surged by over a third to a new record last month amid broad growth across different asset classes, the Swiss-founded technology company said today.

Institutional FX

Hedge-fund legend Steven Cohen invests in Dmitri Galinov’s 24 Exchange

24 Exchange, the OTC platform backed by Fastmatch founder Dmitri Galinov, has completed a fresh fundraising round of $14.25 million at an undisclosed valuation. The recent capital injection was led by Point72 Ventures, the venture capital firm of the hedge fund titan Steven Cohen.

Retail FX

5 Tips to Diversify Your Portfolio

Diversification is a popular investment strategy that has been used for decades by many investors of the calibre of Warren Buffet. Traders and investors take advantage of diversification because it reduces the risk of a portfolio and maximizes its returns.


FX volume at Integral hits a fresh yearly high at $50.6 billion a day

Currency trading on Integral’s platforms rose in November from a year earlier as increased volatility across financial markets led to greater activity on institutional FX venues.

Industry News

Wise planning aggressive North American expansion in 2022

Wise, one of the largest payment technology companies that are looking for different and easier ways to move money around the world, has announced that it would be looking to rapidly ramp up its team and its services in the North American region in 2022.

Digital Assets

Coinbase buys Israeli firm Unbound Security

Coinbase, one of the largest crypto exchanges in the US, has announced that it has bought the company named Unbound Security, an Israel-based firm dealing with the security of crypto transactions, for an undisclosed sum.

Digital Assets

Square changes name to Block, signalling Jack’s interest in blockchain

Square, one of the largest payment companies in the world that are deep into crypto as well, has announced that it would be changing its name to Block, perhaps signaling its increasing intent to delve deeper into the blockchain.

Institutional FX

Cboe reports rebound in FX institutional volumes for November

Cboe’s institutional spot FX platform on Tuesday reported ‎its trading volumes for November 2021, which saw a ‎positive performance as a rise in volatility encouraged more buying and selling ‎of currencies relative to the month prior.‎