Ripple-rival R3 powers JPMorgan-backed securities finance startup

Rick Steves

HQLAx’s prototype version was built using R3’s Corda in 2017.

HQLAᵡ has announced a Series B funding round in which J.P. Morgan joined existing strategic investors BNY Mellon, Goldman Sachs, BNP Paribas Securities Services, Citigroup, and Deutsche Börse Group.

The HQLAᵡ platform enables market participants to transfer ownership of securities seamlessly across disparate collateral pools at precise moments in time.

This allows participants to optimize their liquidity management and collateral management activities, thereby generating operational efficiency gains and capital cost savings.

HQLAᵡ’s core clients are financial institutions active in securities lending and collateral management. J.P. Morgan has already connected to the HQLAᵡ platform as Triparty Agent, and J.P.Morgan will also connect its Agency Securities Lending business in 2021.

The atomic nature of its Delivery vs Delivery (DvD) ownership transfers provides clients with capital cost savings by reducing credit risk, intraday liquidity requirements, and operational risk.

HQLAx derives from High-Quality Liquid Assets, which are cash or assets that can be converted into cash quickly through sales (or by being pledged as collateral) with no significant loss of value.

It was in 2018 that Deutsche Börse Group had announced that together with HQLAx it was building a securities lending solution leveraging the R3 Corda blockchain platform. The bank, via its corporate venture capital arm DB1 Ventures, funded HQLAx’s first steps with an initial investment of a single-digit euro million amount for a minority shareholding.

HQLAx’s prototype version was built using R3’s Corda in 2017 with five project participants in order to transform the proof-of-concept into a live pilot and subsequent production platform.

R3: A rival turned into partner via XRP options at discount price

R3 is a renowned Ripple Labs rival who sued the XRP creator over cryptocurrency options worth more than $1bn, in 2017. The lawsuit alleged that Ripple’s chief executive had tried to terminate the options granted to R3 in 2016 after they surged in value due to a rise in Ripple’s XRP cryptocurrency: the deal was an option to purchase 5bn XRP at an exercise price of $0.0085.

In 2018, Ripple counter sued for $12 billion. Both parties finally entered a confidential agreement in 2018, but the SEC v. Ripple lawsuit has revealed ‘an enterprise software firm’ exercised its rights to purchase 1.04 billion XRP in 2019. It is assumed that it refers to R3.

“Ripple entered into an agreement with an enterprise software firm (‘Option Investor B’) based in Manhattan that gave the firm an option to buy up to 5 billion XRP at a discounted price in exchange for efforts to help Ripple develop a ‘use’ for XRP.”

“The amount of XRP available for purchase under the option was later reduced, and Option Investor B purchased at least 1.04 billion XRP in 2019″, said the document.

So, while R3 and Ripple compete in the same space, the exercised options show how Ripple turned R3 into a partner. In late 2018, R3 launched its new Corda Settler platform using Ripple’s XRP.

Corda Settler is an open-source decentralized application (DApp) aimed to facilitate global payments across enterprise blockchain networks with Ripple’s XRP as its base currency. The Corda Settler is agnostic, though, so payments can be made in any coin.

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