UBS has taken another step in the digital world. The Swiss bank completed its first cross-border intraday repo deal via blockchain.
Earlier this week, Swiss bank UBS completed its first cross-border intraday repo deal with a global Asian bank using the distributed ledger repo (DLR) platform of US-based Broadridge Financial Solutions.
The transaction is seen as an important step towards more efficient intraday liquidity management since one of the main advantages of DLR is greater flexibility in settlement timing. Previously, most transactions were internal, but now that Broadridge has more users, participants can also execute external bilateral transactions such as UBS's.
Increased Flexibility
«Intraday repo is a valuable tool to manage our liquidity usage and provides flexibility in our funding capabilities with reduced operational risk,» says UBS Group treasurer Beatriz Martin, group treasurer at UBS in a media release.
Repo transactions involve selling, in most cases, a government bond, and buying it back at a later date. The net effect is similar to taking out a loan.
According to the latest data from February, Broadridge's DLR platform handles one trillion dollars worth of such transactions each month. The service has been available since mid-2021, with UBS an early adopter of the platform, joining in August of that year.
«This is the next step in executing our vision of transforming global repo market infrastructure,» said Horacio Barakat, head of digital innovation at Broadridge. «We are empowering leading financial institutions like UBS with the ability to dramatically lower risk and operating costs and see enhanced liquidity,» he continued.
A Pioneering Role
UBS is betting big on blockchain. Last November, it issued the largest blockchain bond to date on the SIX Digital Exchange (SDX) in the amount of 375 million Swiss francs with a dual listing on SIX. The entire issue took place on the blockchain.
UBS, like Credit Suisse, is also one of the founding shareholders of Fnality International, a UK-based financial technology company launched in 2019 by a consortium of international banks.
Ready to Launch
Fnality offers blockchain-based payment methods for the future, with the blockchain settlement network set to launch in the UK later this year. Shareholders include ING, Barclays, Banco Santander, and the Nasdaq technology exchange.
Broadridge is a leading international provider of communications and technology solutions for investors in the financial services sector and was originally part of ADP, one of the world's largest IT services companies.
