OCC, the biggest equity derivatives clearing firm in the world, has recently announced that it has chosen Axoni, which is a tech firm specializing in infrastructure and multi-party workflows, in order to create and implement a distributed ledger technology solution to replace its existing securities lending infrastructure.
Apparently, the announcement will be marking another milestone for the transformation of OCC as the innovative and new technology caters to the important challenges within the securities lending market. It shall benefit the clearing member companies of OCC by boosting the efficiency and lowering the reconciliation as well as other associated costs.
The stock loan program of OCC was developed in 1993 for guaranteeing and clearing transactions between the clearing members, as OCC served as a central counterparty (CCP) to all the borrowers and lenders. The stock loan clearing volumes have risen by a compound annual rate of growth of 16% while having an open interest growing by 22%. The OCC balances had been about $72 billion on April 30, amounting to nearly 13% of the overall equities on loan in America.
The DLT development has been expected to start during the second quarter of 2020 and an eventual deployment will be rolling out in several phases. The solution shall be deployed by using Axoni’s AxCore, a distributed ledger protocol, and will be hosted in the cloud.
The aim for the first roll-out is mainly to establish and begin the distributed ledger network for a cleared stock loan transaction which is governed by the OCC, with a possibility of peer nodes at all the clearing member companies that shall help participants to have an accurate and real-time copy of the activity as well as contact information, further lowering the need for manual reconciliation.
Axoni and OOC along with the clearing member companies have recognized multiple opportunities to streamline the processing in the marketplace after a baseline platform is established.