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

Digital Assets

Centralized exchanges are 10 times more popular than DEXs in Western Europe

Western European traders are found to prefer centralized exchanges over decentralized ones as CEX traffic outpaces DEXs by a factor of ten.

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

Industry News

ESG: Australian regulator wins first greenwashing court case against Vanguard

Vanguard admitted that a notable portion of the securities within both the Index and the Fund did not undergo the promised ESG scrutiny.

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

““The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Reviews

IUX Broker Review

IUX, recently rebranded from IUX Markets, stands as a multi-asset Forex broker recognized for its regulatory compliance across various jurisdictions.

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

<