On October 18, 2016, nine firms announced the successful completion of a test of over-the-counter (OTC) equity swap smart contracts and the use of blockchain technology for managing affirmations and post-trade lifecycle processing for OTC equity swaps.

The test, which lasted over several months, showed efficiency improvements and cost savings for mark-to-market calculations of positions and exposures under the transactions, as well as margin payments and corporate action processing when conducted within a permissioned, distributed, peer-to-peer blockchain network.

The firms that participated in the tests, conducted by blockchain technology firm Axoni, included Barclays, Citi, Credit Suisse, J.P. Morgan, IHS Markit, Thomson Reuters, Capco and an undisclosed Tier-1 bank. (Practical Law is a Thomson Reuters company.)

Over the course of the project, Axoni established a blockchain trade processing network using hosted and locally installed deployments of certain distributed ledger software. The group conducted 133 diverse test cases which tested both:

The tests generated smart contracts from simulated legal transaction confirmations and resulted in synchronized records of each transaction. Economic terms as well as computational logic to manage event processing and payment calculations based on market events were embedded into the smart contracts.

The group also conducted over 50 tests of the underlying blockchain infrastructure, assessing its ability to:

In addition to having a 100% success rate operationally, the experiments demonstrated that blockchain can provide an unprecedented level of transparency to regulators in real time while also maintaining data privacy between trading counterparties.