News
Fnality, HQLAᵡ aims to launch blockchain intraday repositories this year – Ledger Insights
Today blockchain companies supported by banks Purpose AND HQLAᵡ announced that they have completed end-to-end testing to enable intraday repo settlement. They plan to allow trades on the Eurex Repo F7 system to be settled via the two blockchain networks, with a production launch expected in the fourth quarter, subject to UK regulatory approvals. Fnality is the UK regulated systemic payment system went live in December AND HQLAᵡ operates its own digital collateral register to enable intraday movement of collateral.
The main advantage is the ability to settle trades at a specific time of the day, allowing institutions to execute intraday repurchase agreements (repos) and have granular control over their liquidity. In conventional repos, collateral settlement usually takes two days. For example, British gilts can be lent out for cash and the transaction is canceled days later.
Simone Cortese, Director of Product Management at Fnality, described the benefits to Ledger Insights. He gave the example of lending some collateral, “entering these repos at 8am, closing them at 2pm. This is an unprecedented level of control of collateral and liquidity management. That’s really the vision.
The UK repo market is almost as large as that of the EU. According to London’s Reporting House, the average weekly outstanding balance was £8.24 trillion ($10.45 trillion) in 2023, with £1.716 billion traded daily.
Blockchain interoperability tests
In late 2022, the first proof of concept between the two platforms was performed, with Goldman Sachs, Santander and UBS involved in that process. Cortese described this as the cornerstone around which a building has now been developed to achieve the ultimate proof of simulated end-to-end resolution. This is the kind of evidence regulators need to see. HQLAᵡ also performed a separate study with JP Morgan and WeMatchwith a different interoperability solution, Ownera’s FinP2P.
In all these studies, the key is interoperability between completely separate blockchain networks. The collateral remains on the HQLAᵡ platform while the ownership simply changes. Likewise, Fnality settlement tokens remain on the Fnality platform but are transferred from one participant to another. The critical element is the ability to enable delivery against payment (DvP) at a precise time.
It works so that the collateral is allocated to the HQLAᵡ network which uses R3’s Corda enterprise blockchain, and the money is allocated to Fnality, which uses an enterprise version of Ethereum. Once contractual obligations are fulfilled, ownership changes atomically on both platforms.
Interoperability is enabled via the Fnality Atomic Settlement Protocol (ASP), which uses Enterprise Ethereum Alliance (EEA) standards. Fnality, its technology partner Adhara, R3 and HQLAᵡ have all contributed to open source Hyperleder Harmonia interoperability protocol.
Other Fnality developments
In another Useless newsWhile the company launched late last year, the Bank of England placed limits on its operations. For now he has only made interbank payments. Repo is an avenue for expansion. Another is currency exchange or payment for payment (PvP), which has always been planned. Additionally, Fnality has previously performed trials with Finteumthe start of FX trading.
For Finality, discussions are ongoing with US regulators about potentially launching there, following the Investment in DTCC last year. However, Fnality would need a central bank account.