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Yesterday, the Korea Times reported that Shinhan Bank in Korea is using blockchain, including for internal functionality. On November 30, the bank adopted blockchain, including smart contracts for Interest Rate Swaps (IRS).
IRSs are types of derivatives that usually allow parties to exchange exposure at a variable interest rate with a fixed interest rate. So they are used for coverage. The derivatives market reached $ 612 billion last year (source: BIS) and is three times larger than the combined global equity and bond markets.
"Prior to the blockchain-based process, there were no standardized rules for maintaining and managing financial records, one reason that market participants had to rely on their own records that often caused errors despite the process requirement. of cross-checking, "a Shinhan official said
"The new system helps to remove such human errors and helps improve work efficiency through clearer and more activity-related communications rather than wasting time correcting mistakes."
There is a bit of activity around derivatives and blockchain, perhaps because the savings potential has been estimated in billions. ISDA's commercial derivatives association has recently created a new standard, the Common Domain Model (CDM) for blockchain and other technologies.
Three months ago, Barclays hosted a hackathon to test the new standard and most of the financial sector blockchain companies participated.
Lee Braine of Barclays Chief Technology Office explained the way of thinking behind the new ISDA standard: "In the post-trade derivatives industry, there is an infrastructure deployed that is too complex for its current purpose, and the proposal is analogous to the reset of a technology "button" that allows you to go back and radically simplify the nature of that infrastructure. "
Shortly after the hackathon Baton Systems, one of the hackathon winners announced that its systems now support the new standard.
A month ago, DTCC, the massive US clearing company, announced that it was being tested for its updated credit derivatives, Trade Information Warehouse (TIW), which now uses the blockchain using Axoni technology. The platform should be launched in the second quarter of 2019. TIW processes 9.9 trillion dollars in liquidated and bilateral derivatives in the year.
