LONDON – 18.06.2024. Fnality and HQLAX have completed the first successful end-to-end (E2E) testing of a cross-chain intraday repo settlement. The trade was submitted in Eurex Repo F7, collateral was earmarked on HQLAX, and cash was earmarked on the Sterling Fnality Payment System TestNet. Upon the trade conditions being fulfilled, both legs were atomically released, completing the settlement at a predetermined precise moment in time. The trade execution was fully automated and programmed via smart contracts and done on a straight-through-processing (STP) basis after it was entered into Eurex Repo F7.
This testing follows on from Fnality and HQLAX completing their first proof of concept (PoC) delivery versus payment (DvP) repo settlement in Q4 2022. Demonstrated together with Banco Santander, Goldman Sachs and UBS, the PoC was the first cross-chain repo swap pilot across R3’s Corda platform and Enterprise Ethereum, setting the foundations for the rapid settlement of intraday transactions. The E2E testing marks the next step in ongoing collaboration between both entities.
The testing showcases a trade-to-settlement cycle of an intraday repo across the Fnality Payment System (FnPS) and the HQLAX Digital Collateral Registry, which bridges the distributed ledger technologies (DLT) of Enterprise Ethereum and R3’s Corda platform.
The protocol used for the test is the Fnality Atomic Settlement Protocol (ASP) which is based on the EEA Interoperability specifications. Fnality has contributed some principles of the Fnality ASP to Hyperledger ‘Harmonia’ which is an open-source project under the Hyperledger foundation. Other contributors include Adhara (Fnality's smart contract development partner), R3 and HQLAX. The aim is to standardise interoperability across enterprise blockchains and DLTs in regulated settings, underlining Fnality's commitment to encouraging the widespread adoption of tokenisation by implementing industry-emerging open and universal interoperability protocols.
The successful E2E testing paves the way for the precise control and easy mobility of liquidity and collateral, ensuring the clearing of wholesale payments in minutes with unprecedented visibility and control. At the same time, it unlocks the ability to settle at a precise moment in time, thus laying the foundation for intraday markets.
Fnality and HQLAX are now preparing to officially launch wholesale cross-chain repo settlements in live environments later this year, subject to regulatory approvals.
Simone Cortese, Director of Product Management, Fnality International said: “Building on our successful demonstration of interoperability between R3 Corda and enterprise Ethereum networks in a DvP transaction in 2022, this milestone signifies a leap forward. It showcases a complete end-to-end process: from a trade originating in Eurex to the transaction settling seamlessly and atomically across FnPS and HQLAX in mere seconds. As we stand on the cusp of our first ‘real’ live transaction, we are poised to unlock groundbreaking opportunities within the intraday finance sector, creating transformative possibilities that will redefine the financial landscape.”
Guido Stroemer, CEO, HQLAX said: “Interoperability across DLT platforms is a core functional requirement for a robust DLT ecosystem for capital markets, which is why we are so pleased with our successful collaboration with Fnality on this transformative DvP use case.”
Frank Gast, MD, Eurex Repo said: “We are thrilled to be part of this groundbreaking initiative with Fnality and HQLAX. The successful end-to-end testing of a cross-chain intraday repo settlement by entering transactions through Eurex Repo’s F7 trading system is a significant milestone in the evolution of the financial industry. We look forward to the official launch later this year.”
Peter Munnings, Co-founder, Adhara said: “It has been an exciting opportunity to bring the first standards-based, regulated DvP interoperability solution into production with Fnality and HQLAX. Additionally, being able to visualise the intraday settlement process on DC Commander Trade View has showcased how powerful this instrument will be for Intraday Liquidity Managers”.
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About Fnality
Fnality is developing a series of regulated, jurisdictional, and DLT-based wholesale payment systems. Each system, known as Fnality Payment System (FnPS), is supervised by its respective central bank.
Within an FnPS, participants utilise bankruptcy remote settlement balances backed 1-to-1 by central bank money for instant wholesale payments. The launch of FnPSs in key jurisdictions will enable real-time cross-currency payments and the secure settlement of any delivery versus payment transactions atomically and around the clock. The credit quality of central bank funds underlying the settlement balances will provide the missing ingredient for novel digital asset markets: a high-quality on-chain cash asset.
In December 2023, the Sterling FnPS, previously recognised by HM Treasury as a systemically important payment system, connected to CHAPS, became the first holder of a BoE Omnibus Account, and commenced controlled live payments. Joining a handful of other regulated payment systems in the UK, it became the World’s first regulated DLT-based wholesale payment system, settling in digital central bank funds, and part of the UK’s recognised payments infrastructure.
For more information, please visit www.fnality.org
About HQLAX
HQLAX is an innovative financial technology firm that leverages DLT to bring game-changing efficiencies to the securities finance and repo industry. Our core clients are banks and asset managers active in the global securities finance and repo markets, and our unique platform enables market participants to execute frictionless, precise and real-time transfer of ownership of securities.
For more information, please visit www.hqla-x.com
About Adhara
Adhara is a leader in developing software solutions for tokenised money over smart contract-enabled, decentralised ledgers. Adhara serves commercial banking groups through Deposit Token solutions, enabling intra-group liquidity and payments optimisation and digital cash services for institutional clients. Via their broader solution set, Adhara also supports FMIs looking to leverage the value of digital cash in payments orchestration, issuance and margining services. Their anchor product, DC Commander, is designed to consistently help clients engage with a variety of new digital settlement layers and business platforms, extracting structural benefits by driving increasing cash optimisation and opening up new revenue-generating strategies.
For more information, visit www.adhara.io
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