Barclays in the news: trading aces
Simultaneously hosted at Barclays Rise facilities in London and New York, the DerivHack 2018 hackathon could spark savings for the financial services industry “in the double-digit billions”, according to Sunil Challa, from Barclays’ Business Architecture team. Jeremy Wilson, Vice-Chairman of Corporate Banking at Barclays, said the event was “one of those remarkable instances of the establishment of a new infrastructure, where the work gets done in a basement but lays the foundation for decades, if not centuries, to come.”
The challenge for participants was to apply the Common Domain Model (CDM) developed by the International Swaps and Derivatives Association (ISDA – the derivatives industry body), using emerging technologies such as blockchain to solve representative use-cases. Potential efficiencies could save the sector US $3 billion a year.
Lee Braine, from the Chief Technology Office at Barclays, was quoted in LedgerInsights explaining the thinking behind ISDA’s new standard: “Across the post-trade derivatives industry, there is infrastructure deployed that is too complex for its current purpose, and the proposal is analogous to pressing a technology ‘reset button’, allowing you to go back and radically simplify the nature of that infrastructure.”
Needing to standardise the data and business processes for derivatives, ISDA, with input from several banks, published the digital version of its CDM in June. The expectation of DerivHack 2018 is that distributed ledger technology can help with this simplification and lead to those multi-billion dollar efficiency improvements.
While the stated focus was on the use of blockchain in post-trade processes, perhaps the most significant development was a realisation, according to London event winner Andrew Kouloumbrides of Xceptor, that the front office could be a “starting point” for transformation using distributed ledger technology. “By focusing on back-office processes such as post-trade, we are actually looking to solve a symptom rather than a fundamental cause.”
Reflecting the necessity of collaboration in maximising blockchain’s potential, the events were co-sponsored by Barclays, ISDA, Deloitte and Thomson Reuters, with the judges drawn from banks including Barclays, JP Morgan, UBS and HSBC.
ISDA and Barclays provided teams with a substantial set of materials two weeks prior to the hackathon, before the two days of dedicated solving and coding on four new use cases took place in Rise facilities in London and New York.
For ISDA, the main benefit of the event was feedback on their new CDM. Clive Ansell, ISDA’s Head of Market Infrastructure and Technology told LedgerInsights: “The interest from our perspective was to have an opportunity to expose that model to a wide variety of industry participants – some incumbents, some new, some fintechs – and really explore how fit for purpose that model is.” Ansell, who was a judge at the London event, added that “having an experienced partner like Barclays helped tremendously”.
Barclays’ Braine, also a London judge, predicted market infrastructure providers are most likely to deploy the CDM first, followed by banks adopting it in-house, and ultimately regulators pulling directly from the ledger. The completion of such transformative projects may be five to 10 years away, he said, and by that time, the CDM could potentially be configured to utilise other emerging technologies such as artificial intelligence. Phase two of ISDA’s CDM project will see it develop use cases in five key areas: rates, credit, collateral, reporting and equity derivatives.