Kiffmeister’s #Fintech Daily Digest (12/22/2021)

Settlement choice DVP model using CBDC for securities settlement

A paper from R3 proposes a new securities settlement model that offers the ability to settle both gross and netted trades instantly using central bank digital currency (CBDC) and digital assets on a blockchain infrastructure. Existing delivery versus payment models exist on a continuum from intraday gross settlement–which minimizes settlement risk while requiring a great deal of liquidity–to delayed batch settlement–which offers netting efficiencies but delays final settlement. Market participants acknowledge the benefits of real time gross settlement but continue to rely on the operational and liquidity advantages of delayed batch settlement. The R3 model purports to be a “best of both worlds” model. [Read more]

Vanguard, State Street use blockchain for forex derivatives margins

State Street Digital was involved in a transaction using Symbiont’s Assembly enterprise blockchain to complete margin calculations for a live over the counter foreign exchange forward contract. This transaction marks its transition from pilot to production. By automating margin assessments, calculations can be made more regularly. If the movement of collateral used to support the margin requirements also happens automatically together, this can significantly reduce counterparty risks. [Read more]

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