As part of its push to bring the advantages of blockchain technology to mainstream finance, J.P. Morgan has carried out a repo transaction on a proprietary blockchain application and envisions opening the repo market as a source of intraday liquidity.
The bank reported that it executed an intraday repo trade between its broker dealer and banking units using a blockchain app that was developed in-house.
Executing repo transactions on a blockchain may enable “borrowers and lenders to execute shorter-term, intraday repo transactions with real-time, simultaneous transaction settlement, creating new ways to access intraday liquidity,” the bank said.
J.P. Morgan recently launched a new business unit — Onyx — to commercialize blockchain technology. The intraday repo application is deployed on the platform developed by Onyx and uses its digital currency, JPM Coin.
“The current repo market has some technical inefficiencies, and we identified blockchain technology as a way to reduce our clients’ intraday risk profile,” said Scott Lucas, head of markets DLT at J.P. Morgan.
“By deploying blockchain, we created new opportunities to streamline operational processes and accelerate settlement for repo. Our new solution will help unlock trapped pockets of liquidity for intraday use and allow for reduced risk profiles for our clients and J.P. Morgan,” Lucas added.
“This is an exciting project which vividly highlights where enterprise blockchain can address a real-world problem in the financial system and we look forward to going live in early 2021,” said Mathew McDermott, global head of digital assets at Goldman Sachs, which has participated in trade simulations with JPM.