Nasdaq’s Proof-of-Concept Blockchain to Resolve Concerning Margin Calls Issues

    According to a report made available Tuesday, June 19, Nasdaq has successfully verified a Proof-of-Concept blockchain solution that provides securities solutions. This effort is believed to be the coming together of several financial firms including ABN AMRO Clearing, EuroCCP and Euroclear. Based on the claims made, their combined values are what got them together in the first place.

    What will this newly developed blockchain platform comprise of? The goal is to address ongoing issues of Central Counterparties (CCPs), namely, the difficulties tied to managing and handling margin calls.

    A margin call is when a broker calls onto investors to deposit more cash or securities as a way to make up for any losses made or for maintenance purposes. The investor in this situation will either, have to put in more money, or the broker will get rid of existing assets on hand.

    This, even to EuroCCP’s CEO, Diana Chan is inefficient, as she believes that the traditional system at hand does not underline so much on counterparty risk protection for equity, which she describes as “not well-served”.

    Based on the reporting, Nasdaq’s choice of PoC has been proven to be efficient as it,

    “demonstrated that a shared, resilient network can be built between collateral givers, collateral takers and intermediaries.”

    Furthermore, it allows those involved to,

    “handle the margin call, the securities collateral delivery and the return process within minutes.”

    Global Head of Treasury at ABN AMRO Clearing, Coen van Walbeek strongly supports the PoC, to which he suggested it as “a breakthrough for the CCP model”, along with a rep from Nasdaq quoting the blockchain-based platform as an “excellent example”, of what the tech can do and how it can “transform markets everywhere”.

    Nasdaq’s CEO, Adena Friedman has previously been impressed and also continues to, with the blockchain technology, despite the current issues it faces like scalability. However, Friedman, since this comment made, has been rooting for the tech, perceiving it as one “that could be quire disruptive”.

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