Sberbank, BC Region and the NSD enter into world’s first three-way repo deal using blockchain technology

Dec 06, 2018
  • The NSD’s Collateral Management System (CMS) was used for settlement, which let the repo deal’s participants automate the settlement procedure.

6 December 2018, Moscow – With the participation of the National Settlement Depository (NSD), Sberbank and Brokerage Company Region have entered into the world’s first three-way OTC repo deal using a smart contract on a blockchain network.

Andrey Shemetov, Vice President of Sberbank and Head of the Global Markets Department:

“The first three-party repo executed using a smart contract on a blockchain network is the latest in a number of significant steps to automate Sberbank’s business processes for working with counterparties on financial markets. The combination of smart contracts and distributed register technology makes financial contracts more transparent and increases security for both clients and the bank.

We are confident that the market will adopt our technology as a new standard for carrying out OTC repo deals and market players will appreciate all the advantages it offers.”

The deal involved a rouble-denominated OTC repo secured by federal loan bonds (OFZs). From a legal point of view, the deal is governed by Russian law and is a binding financial contract that was signed electronically using a smart contract and e-signatures via the CMS of the NSD.

Alina Akchurina, Managing Director for Collateral Management Systems at the NSD:

“Integrating the NSD’s CMS into distributed blockchain networks is part of our development strategy. Using blockchain to service repo deals is one of the few examples that justify the use of this technology. The combination of independent settlements carried out in smart contracts and the neutral position of the NSD as a collateral management agent create an extremely flexible and progressive mechanism for performing OTC deals. During this pilot deal, the NSD not only acted as the settlement depository, but also provided collateral management services to its participants, and supplied the market data used for the settlement of the smart contract.”

The deal had three parties: the seller – Sberbank, the buyer – BC Region, and the settlement agent – the NSD. Interaction between the parties was fully automated and took place on a blockchain network. Each participant submitted an instruction to its node in the network, after which the smart contract concluded the deal and submitted settlement instructions to the NSD’s clearing system. The NSD’s CMS platform was used to carry our settlements, which allowed the participants of the repo deal to automate the execution of margins, settlement functions and repository reporting.

Andrey Zhukov, Partner and Member of the Board of Directors of BC Region:

“Region Group keeps track of the latest financial technologies to ensure that cutting-edge practices and solutions are incorporated into our products. We are extremely pleased with our cooperation with Sberbank and the NSD to carry out the pilot blockchain repo deal via the NSD’s CMS. Everyone who participated in the deal was part of a major joint effort. We received significant experience and expertise with regard to this innovative product. I am certain that in the future, blockchain repo deals using the NSD’s CMS will occupy their rightful place in the OTC repo market.”