Commerzbank, Deutsche Börse complete blockchain post-trade settlement test

Today, Commerzbank announced that it has completed a test using distributed ledger technology (DLT) for post-trade services. The bank, along with exchange Deutsche Börse and asset manager MEAG, settled a securities transaction with blockchain-based tokens. Commerzbank then used these cash tokens as collateral as Eurex Clearing’s Central Counterparty.

The parties hope to explore the potential for DLT in post-trade with tokenization. Eurex Clearing tokenized the cash, while Commerzbank was the seller and custodian of the tokenized securities. MEAG, Munich Re and ERGO’s asset management firm, bought the securities. Deutsche Börse and Commerzbank provided the underlying blockchain technology.

The bank and exchange jointly designed the system, which was first used in March. Back then, Deutsche Börse and Commerzbank completed a tokenized repo transaction. They simultaneously exchanged cash and securities tokens.

“After our first collaboration with Deutsche Börse in March 2019, we are pleased to jointly reach a further milestone in using DLT for post-trade-services in capital markets. We will continue to work on these topics to provide our clients with market-ready solutions,” said Benjamin Duve, Head of Custody and Direct Market Access at Commerzbank AG.

Similarly, today’s transaction swapped tokenized cash and securities in a legally binding settlement.

“For us as investor, distributed ledger technology has a significant potential to increase efficiency of operations,” explained MEAG board member Dr Frank Wellhöfer.

“By reducing the need for intermediaries, the transaction process of securities is going to accelerate furthermore. The involvement of tokens representing securities and money will facilitate network efficiencies and build a foundation for the creation of standards. This is important for the buy-side as standards lead to broader market acceptance and thus create liquidity on DLT platforms in general,” he continued.

Apart from the repo transaction, Commerzbank is an active member of the Marco Polo trade finance network, involved in pilots with LBBW and, last week, Alfa-Bank. It has worked on machine payments with Daimler, digital payments with Siemens, and completed a DLT forex transfer.

The bank is also involved with collateral management blockchain HQLAX, which was jointly developed and backed by the Deutsche Börse Group. As an exchange, Deutsche Börse has recently launched its digital asset bank Sygnum. Sygnum was built with Swisscom and licensed by FINMA.


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