Eurex Clearing has started live use of distributed ledger technology (DLT) for collateral management, enabling members to post margin without physically moving securities between custodians. The setup, developed with HQLAx and supported by Clearstream Banking Luxembourg, aims to reduce transfer times and operational frictions in the collateral process, states Eurex.
The DLT-based model received a regulatory green light in January via a no-action letter from Germany’s financial regulator, BaFin, as reported on by PostTrade 360°. Production use began in June.
The key feature is the ability to transfer collateral digitally via the HQLAx platform, without requiring the underlying securities to move. Assets remain at the clearing member’s custodian but are registered in a digital ledger. This allows for near-instant collateral transfers to Clearstream, which acts as sub-custodian for Eurex.
Workaround
Under the conventional model, collateral transfers involve physically shifting securities between custodians, typically constrained to business hours and subject to settlement delays. The DLT approach removes this step, making the process faster and potentially more flexible, particularly during late-day or time-critical operations, according to Eurex.
Industry participation
HQLAx has attracted integration from several major custody and tri-party providers, including Clearstream, Euroclear, BNY, BNP Paribas, Citi and JP Morgan. While the platform does not involve tokenisation in a strict technical sense, the functional outcome resembles several token-based collateral initiatives being explored by other infrastructures.
Clearing houses such as CME, DTCC and ICE are reported to be in earlier stages of developing similar systems. With the HQLAx-based service now in production, Eurex positions itself among the early movers in deploying DLT for live collateral operations.
