Two German banks, DekaBank and Metzler Bank, carried out a securities lending transaction on blockchain without prior collateralisation.
The transaction was processed through DekaBank’s blockchain-based digital securities platform, the Secure Worldwide Interbank Asset Transfer or SWIAT platform, with technological backing from Frankfurt-based software specialist Comyno.
Trading parties note that by lending through the SWIAT platform, the transaction will take place via a delivery versus delivery (DvD) transaction and the established collateral requirements will no longer be necessary.
In a joint press release, the two banks indicate that transfers are made directly between custodian banks without moving securities between CSD accounts. It does not involve tokenization and can eliminate the chains of custody that have traditionally supported the securities lending business.
For such securities transactions, trading and settlement now take place almost simultaneously, explains Andreas Tanneberger, Head of Fixed Income Transactions at Metzler Capital Markets.
Other industry partners are invited to join this market initiative, launched by Deka, which aims to establish itself as the industry standard for digital settlement. The participating partners will also have the possibility to offer their own services and products on the platform and to develop the range of functions offered by the SWIAT platform.
“With potential for the DVD business, the lending market is becoming more attractive to market players, new and existing,” says Michael Cyrus, Deka’s head of money, forex and repo / loans.
“This transaction represents another important step in the development of a fully digitized blockchain-based ecosystem for financial markets,” said Cyrus.
DekaBank is the securities services arm of the German savings bank financial group (Sparkassen-Finanzgruppe).
B. Metzler seel. Sohn & Co. AG is Germany’s oldest private bank, which has been in the family for over 345 years.