JP Morgan has Automated Derivatives Margin Payments using Blockchain

Currently, the system requires collateral custodians to to manually run multiple systems and reports. However, the new blockchain solution which is integrated with JPMorgan’s proprietary automation system; will reportedly eliminate manual intervention in the collateral process.  This will then expedite the collateral process workflow.

Moreover, per the announcement, the platform automates margining and collateral flows; allowing users to see the flow of assets between JPMorgan and the participatory clearinghouses. However, the announcement does not specify whether the solution is based on JP Morgan’s Quorum blockchain platform.

Blockchain Solution Cuts time used from Hours to Real-time

The Head of Global Clearing Operations and Trading Cost Management at J.P. Morgan, Anthony Fraser said:

“The technology we have developed reduces the time needed to process the entire collateral workflow from hours to near real-time.We’re already seeing faster, more efficient payments, reconciliation and reporting for all parties in the collateral lifecycle.”

In addition, Baton Systems CEO, Arjun Jayaram said that:

‘It removes the need for manual intervention in the collateral process by integrating with financial institutions’ collateral and cash systems, leaving their existing processes and systems in place.’

The announcement also states that “the new solution also synchronizes and accelerates; the collateral substitution process associated with two legs of that process; e.g., cash vs collateral, currency vs currency, or collateral vs collateral.” 

In conclusion, Blockchain technology has been used in collateral transfers before. Back in June 2019, major stock exchange operator Nasdaq successfully piloted a blockchain-based proof-of-concept (POC) providing a 24/7 securities collateral solution. The PoC reportedly enabled parties to handle the margin call, the securities collateral delivery and the return process within minutes.