Challenges in Derivatives Markets

Managing derivatives contracts is complex and involves coordinating activities across several parties. While the industry has moved somewhat towards digital solutions, many operations are hampered by inefficiencies, most notably around the need to reconcile position-related data on an ongoing basis. Tokenized derivatives based on XDEX addresses key inefficiencies and risks. 

How We Help Derivatives Markets

XDEX enables an interoperability standard of governance based upon a shared source of truth and mutualizes processing across ecosystems or within institutions, including:

  • Establishes a shared platform for managing post-trade life cycle of derivatives across counterparties
  • Replaces post-trade infrastructure in the case of markets with existing central infrastructures
  • Establishes a platform for institutions to manage their margin- and collateral-pledging workflows across all of their derivatives counterparties
  • Creates a platform for mutualizing the data and workflow for finalizing derivatives trades

While traditionally brokers and custodians need to manually coordinate across a range of different systems to facilitate margin payments – a costly and time-consuming set of processes.

XDEX can enable faster, synchronized processing across institutions.

XDEX can integrate with other platforms to create a shared digital record of all aspects of a derivative transaction post-trade.

Major changes from current state

  • Centralize institution’s visibility of collateral/margin obligations across derivatives clearing houses
  • Further automate margining and collateral workflows using smart contracts
  • Integrate collateral/payment instructions for derivatives central counterparties directly into collateral and treasury optimization systems

Benefits

  • Potential for significant operational efficiencies stemming from end-to-end automation of collateral workflows
  • Better optimization of collateral and cash balances through faster payments and capital deployment, potentially reducing the need to prefund margins
  • Reduce risks and costs associated with manual processing

Trading fees can be calculated in real time across participants, trade matching and enrichment can be automated in real time and participants can share a distributed ledger for trade capture.

Major changes from current state

  • Trade capture occurs on a shared ledger, minimizing the need to match trades across disparate systems
  • Broker trading fees are calculated on the platform using shared data in real time
  • Trade matching and enrichment on same day (or in real time), with concurrent processing by all parties

Benefits

  • Potential to significantly reduce the incidence of trade breaks, thereby reducing the cost of investigating and reconciling fails
  • Increase transparency for counterparties and intermediaries in trades
  • Potential to reduce risk via same-day trade matching, enrichment and clearing