HQLAᵡ is the European DLT startup backed by several systemically important banks including JP Morgan and HSBC. It enables collateral mobility by locking assets at custodians and transferring legal title via the DLT platform. The key benefit is this supports intraday collateral movements without the settlement delays involved in moving assets between custodians. For a long time HQLAᵡ has supported Triparty agents, but the main functionality has been sourcing collateral from the Triparty agents. Now it has concluded a feasibility initiative that will support Triparty agents as active participants in the platform.
Hence, rather than just moving assets to the platform, Triparty agents can extend their sub-custody networks to include the HQLAᵡ platform.
This latest initiative means that the HQLAᵡ platform could be used to transfer collateral to or between Triparty agents. In other words, a bank with collateral at a custodian can immobilize it to record it on the HQLAᵡ ledger and then update it in favor of the Triparty agent. That collateral can then be used for any Triparty transaction and is not constrained by the usual settlement delays. As a result, banks will have longer intra-day settlement windows.
Industry needs to embrace it
The additional Triparty functionality is not a product being launched. The industry participants are simply saying they have concluded it is feasible. Banks represented in the group include HSBC, UBS, and Standard Chartered. Triparty Agents included JP Morgan and Clearstream and service providers Transcend and Pirum. They developed the operating model with HQLAᵡ and the Deutsche Börse Group.
“The industry has been trying to solve for Triparty interoperability for over 20 years, and we are very excited that our feasibility study confirmed our platform as a scalable industry wide solution for collateral mobility across Triparty Agents and Custodians,” said Guido Stroemer, HQLAᵡ CEO. “The solution is here, now it’s up to the industry to implement it.”
Meanwhile, one of the other current focuses of HQLAᵡ is repo. It recently participated in the ECB’s wholesale DLT settlement trials for repo transactions where HQLAᵡ was used for the collateral leg and the Bundesbank’s Trigger solution for the cash leg. It is also planning to launch a repo solution with UK DLT settlement firm Fnality managing the GBP cash leg.
