DTCC’s Blockchain-Powered Trade Information Warehouse Set for Late 2019 Launch

One of the more ambitious market-structure projects utilizing blockchain is now complete and is set to go live by the end of the year, according to executives at the Depository Trust & Clearing Corp. (DTCC).

The Trade Information Warehouse (TIW), which handles lifecycle events in the majority of trades in the $12 trillion credit derivatives market and is operated by the DTCC, will be implemented around the middle of the fourth quarter of 2019.

“We’ve been undergoing a period of robust testing,” says Jennifer Peve, managing director of business development and fintech strategy at the DTCC. “We’ve been very pleased with the results so far, particularly given that this is such a nascent technology.”

The platform, which was built by IBM and Axoni, with industry distributed-ledger technology (DLT) consortium R3 acting in an advisory capacity, has been under development for some time, and its release has been continually pushed back. WatersTechnology reported in September 2018 that the project was scheduled for an early-to-mid-2019 launch, after it had failed to meet previously suggested go-live dates stretching back more than a year.

However, the project is not being developed in isolation. Along with industry participants testing the platform—the first proof-of-concept test was conducted in April 2016 between the DTCC, IHS Markit and four banks—there are also other firms relying on its implementation in order to release their own technology revamps. IHS Markit, for instance, through its MarkitServ division, is planning to integrate with the TIW as part of the introduction of its next-generation TradeServ platform.

The TIW project is also one of the most high-profile examples of how DLT can be practically applied within complicated markets such as credit derivatives trading. While the technology has received an enormous amount of attention in recent years, real-world examples of working platforms are few and far between, and those that have worked have often been confined to targeted applications that handle reference data such as corporate actions, or proof-of-concept tests that aren’t in production as of yet.

The DTCC has long been an ardent supporter of DLT. Peve explains that the work accomplished on the TIW not only provides a working example of the benefits of this technology, but also lays the groundwork for future iterations of DLT in other asset classes.

“With TIW, we’ve re-platformed, and we’ve created this foundational layer where we have the opportunity to have real-time data synchronized across multiple participants. Over time, if we can demonstrate that’s successful, we can then start to think about how we can add additional asset classes, or lifecycle processing, to that platform. When you start to do that, you start to aggregate the data into a single node for clients, and then it becomes a conversation about if there is a future vision about reducing the technology footprint.”

That vision, she says “is a good five years off,” but adds that the technology has shown promise. Outside of the TIW, the DTCC has also partnered with Digital Asset Holdings and R3 to explore the possibility of using a DLT-based system for equities settlement.

Cracking such a case would go a long way to proving the viability of using DLT in capital markets, given that the protocols widely used to date have been criticized as being too slow and incapable of handling the kinds of volumes processed by the DTCC, which processes more than 100 million trades on average daily.

The DTCC ran parallel tests with the two companies, in which it picked a point in time for US equities clearing data where it cleared 115 million trades on a particular day. It then tasked the firms with using their technology to handle the processing of 6,300 trades per second continuously for five hours. The tests were conducted in ringfenced Amazon Web Services cloud environments into which the DTCC deployed 170 nodes, of which 25 were exchange nodes that submitted trades to the network, a DTCC node that performed netting, and then executed settlement on-chain, with the rest representing participants.

Both platforms were able to achieve the numbers for two consecutive days. Peve admits that, as it wasn’t a stress test, they didn’t “push the boundaries” with the test, but also says that they didn’t hit the performance cap, either. What the test told them, she says, was that the system can handle high volumes—perhaps not specifically for US equities, but other markets may benefit from it.

The natural question, then, is why bother replacing existing technology—which can handle trade processing at the volumes the DTCC requires—with DLT? Peve says that the key strength of DLT lies in its ability to provide real-time data in a single source, along with the security elements.

“For us, today, it’s about providing a foundational layer where data is then synchronized on a real-time basis across multiple participants. You can do that through APIs, when you look at technology there are a number of ways you can accomplish it, but for the real-time aspect of this data [that’s key], and the cryptographically secured data on the ledger is a selling point. It’s not perfect, but there’s added value in every record being cryptographically secured.”