NASDAQ pilots blockchain project for margin calls and deliveries
A proof-of-concept test led by NASDAQ using the blockchain has proven to be a huge success. The new platform provides an efficient securities collateral solution available around the clock, and was designed through a partnership between the stock exchange operator and several global financial companies.
According to a press release, the platform was created to address challenges faced by Central Counterparties (CCP) who have to make margin calls following the close of business at stock exchanges. Margin calls are placed by investors with a margin account held at a brokerage firm, and are made to fulfill requirements of a "maintenance margin," collateral against potential losses. Apart from NASDAQ, the project included EuroCCP, ABN AMRO Clearing and Euroclear.
To comply with European Market Infrastructure REgulations, derivatives clearances must be made quickly. Due to the international operations of exchanges spanning multiple time zones, making these calls has been extremely difficult. The new blockchain platform “demonstrated that a shared, resilient network can be built between collateral givers, collateral takers and intermediaries" successfully and will enable parties involved “to handle the margin call, the securities collateral delivery and the return process within minutes.”
NASDAQ CEO Adena Friedman said earlier this month that the blockchain is a “fascinating technology that could be quite disruptive," despite having scalability issues. Friedman has also suggested that the exchange could consider becoming a cryptocurrency exchange if regulatory clarity is introduced.
Euroclear controls over $40 billion in client assets, while ABN AMRO processes over 20 million trades each day. The clearing house is also consistently ranked among the top three. EuroCCP is considered to be “the most connected CCP in Europe,” and reportedly controls 82% of all equity trades executed across 26 different platforms.