The OCC has selected Axoni, a technology firm that specializes in
multi-party workflows and infrastructure, to develop and implement a
distributed ledger technology solution to replace its existing
securities lending infrastructure.
The world’s largest equity derivatives clearing organization is going
with a DLT solution to address the fundamental challenges in the
securities lending industry and benefit OCC’s clearing member firms by
increasing efficiency and reducing reconciliation and associated
costs.
The firm’s stock loan program was created in 1993 to clear and
guarantee transactions between its clearing members, Stock loan
clearing volumes have increased by a compound annual growth rate of
16% since 2012 and open interest has grown by 22%. As of April 30, OCC
balances were approximately $72 billion, which is about 13% of the
total equities on loan across the Americas.
Axoni will start developing the cloud-based infrastructure by Q2 2020,
using its proprietary distributed ledger protocol, AxCore. Deployment
is expected to roll out in phases in order to establish a permissioned
distributed ledger network for cleared stock loan transactions,
governed by OCC, with the potential for peer nodes at clearing member
firms that will enable participants to have a real-time, accurate copy
of contract and activity information, thereby reducing the need for
manual reconciliation.
Matt Wolfe, OCC Vice President, Securities Finance, said: “OCC’s role
in the securities lending market is to serve as the central
counterparty for lenders and borrowers. We provide a guarantee of
performance and mitigate the risk of loss due to a failure by the
original lender or borrower. Our work with Axoni seeks to address
industry challenges and reduce costs stemming from manual processes,
lack of automation, and disparate systems. The new platform lays the
foundation for a future-fit CCP securities lending model.”
Ishan Singh, Vice President of Solutions at Axoni, commented:
“Deploying distributed ledger technology in production at this scale
will be a significant moment for the securities lending industry. The
combination of technology and business expertise being applied to this
project will generate a variety of benefits for industry stakeholders.
We look forward to working with OCC to bring those benefits to the
market.”
