Foreign exchange settlement institution CLS Group is collaborating with IBM to enable banks, buy- and sell-side firms, fintechs and software vendors to deploy, share and consume services using distributed ledger technology (DLT). The hosted platform, LedgerConnect, will allow access to services in areas such as, but not limited to, know-your-customer (KYC) and sanctions screening, collateral management, derivatives post-trade processing and reconciliation, and market data.
“By hosting these services on a single, enterprise-grade network and DLT infrastructure, organizations can focus on business objectives rather than building and operating the underlying infrastructure, enabling them to realize operational efficiencies and cost savings,” CLS said in a July 30 announcement.
One of the vendor participants, OpenRisk, is in proofs of concept with five global banks for its “semantic smart contracts” in derivatives collateral management, said founder and CEO Narasimha Kodihalli. It has been working with IBM and CLS for almost a year.
“We have a semantic approach to annotate and make sure there is no ambiguity and that both sides have the same understanding of the terms and legal structure in ISDA contracts,” Kodihalli explained.
“In any bank there are seven to 10 versions of the same executed contract. When you look at it from a counterparty perspective, on one single contract you have 10 to 20 different versions of that contract for different business purposes. What we are doing right now on the ledger is creating one golden source of the contract that can be used internally and externally.”
Of LedgerConnect, Kodihalli said, “Unlike previous efforts where customers created a silo solution, this will provide a broad solution. IBM is doing the platform, CLS does the policy, and vendors can provide their vetted solutions.”