Future of Finance

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For HQLAx tri-party repo is the point of departure not the destination

For HQLAx tri-party repo is the point of departure not the destination

HQLAx is a properly funded start-up using the R3 Corda variant of blockchain technology to improve the ability of banks to mobilise eligible collateral, wherever it is, by tokenising assets while leaving them exactly where they are.

Users expect the service to yield massive benefits in capital and liquidity savings as well as lower operational costs, but the stated aim of the venture – “frictionless ownership transfers of assets” – is capable of extension far beyond the starting-point. Future of Finance co-founder Dominic Hobson spoke with Tilman Fechter, a Member of the Executive Board and Head of Banking, Funding and Financing at Clearstream Banking and also a member of the Board of HQLAx, and Nick Short, chief operating officer (COO) at HQLAx, about the short and long term ambitions of the business.

Questions that are being asked

  • The clue is in the name: HQLA-x. Is the mission, basically, to run a securities lending/swapping service to help investment banks meet regulatory-driven (Capital Ratio, NSFR, LCR) demands to post HQLA as collateral through collateral upgrade trades? NS
  • USING DLT BLOCKCVAN HQLA-x operates without the collateral having to move, because it tokenizes (none of your material uses this word) assets in custody puts them into “baskets” and stores who owns what in a ledger all parties can view. Is that right and, if so or if not, (a) how does it work in practice and (b) why does it satisfy regulations? TF