Axoni CEO Hails Blockchain 'Success' in 85 Test Cases

Actual, tangible proof of the successful use of blockchain technologies is a bit harder to come by, but that was the case with Axoni, which saw a 100 percent success rate across 85 test cases looking at the capabilities of blockchain and smart contracts to manage the post-trade lifecycle events of standard North American single-name credit default swaps (CDSs).

Bank of America Merrill Lynch, Citi, Credit Suisse and JPMorgan were the four banks involved in the tests, along with the Depository Trust and Clearing Corp. (DTCC) and Markit. Greg Schvey, Axoni CEO, tells WatersTechnology his firm spent the better part of the last year pitching the idea to different firms in hopes of getting a complete ecosystem of the CDS market.

"We want to get enough major CDS dealers to make this relevant, as well as buy-in from the parties that are critical to credit derivative processing and asset servicing," Schvey says.

Timeline

The group was formally assembled in December 2015, and the project officially kicked off in January. The testing was done in early March, with the conclusion of the entire project coming at the end of the first quarter.

“We want to get enough major CDS dealers to make this relevant, as well as buy-in from the parties that are critical to credit derivative processing and asset servicing,” Greg Schvey, Axoni

Schvey says between 50 and 60 criteria for success were initially assembled by the participants, along with Axoni's guidance. The firm then developed tests to make sure all points were demonstrated.

The majority of the tests were use-cases, according to Schvey. For example: If you have a contract where the representative is in default and you try to make a payment on it, is that caught properly?

Functionality was a focal point of the tests, looking at lifecycle events and data management. Privacy, resiliency and the ability of the technology to query data were also looked at, among other things.

Next Up

Schvey declined to get into what Axoni's future plans were. He also declined to speculate on a timeline of when actual implementation of blockchain technology might occur.

In March, interdealer broker Icap's Post Trade Risk and Information (PTRI) division completed a proof of concept of a distributed ledger using blockchain technology from Axoni, which is part of Icap's Euclid Opportunities, a fund that invests in early-stage fintech companies.

A change won't occur overnight, especially in something the size of the CDS market, Schvey says. However, successful experiments like these have caused many in the industry to move their timeline up, according to Schvey.

"There is an immense amount of testing for any sort of product deployment of software. But, I think people have realized the timeline is actually potentially much faster than they were expecting now that there is actually real technology out there," Schvey says. "With all the hype that's been in this space, giving people a tangible project with real success on it where they can actually do the things they need has definitely reinvigorated a lot of the workflows here."