Commerzbank, Deutsche Boerse complete blockchain PoC for legally binding repo transaction

While Commerzbank’s R&D unit “Main Incubator” developed the DLT platform, the full scope of the technology used for the DLT-powered repo transaction PoC was reportedly developed jointly by the two partners.

For the DLT-enabled PoC, the repo transaction was based on a EUR 10 million bond issued by KfW Bankengruppe, for a term of seven days at a negative interest rate of -0.5%.

A repo transaction is commonly used for short-term borrowing, and allows dealers to sell securities to investors and repurchase them the following day, or as otherwise determined. For the party selling the security, the process is termed a repo, whereas for the counterparty, it is known as a reverse repurchase agreement.

To settle the transaction, Commerzbank and Deutsche Boerse generated digital tokens for both commercial bank money and securities. These were then simultaneously exchanged using a Commerzbank-operated DLT platform.

In February 2019, Commerbank conducted a pilot for money market security transaction using a Corda-based platform, in partnership with major technology companies Continental and Siemens.