Euroclear and proprietary blockchain vendor itBit plan to speed up gold and precious metals trading with a new clearing system slated to go live by the start of next year.
The new platform, which is based on itBit’s Bankchain platform, aims to replace London Precious Metal Clearing Ltd.’s decades-old AURUM electronic clearing service for allocated and non-allocated gold trades.
Charles Cascarilla, itBit
“Almost all of the LPMCL members are participating in our market advisory group, which we kicked off on June 20,” Charles Cascarilla, CEO of itBit told Market Media.
By using blockchain’s write-once, change-never nature, non-allocated trades, which represent approximately 90% of gold trades, effectively have the same characteristics as allocated trades.
“This will give users better accounting treatments from a risk-weighted asset perspective and from a net stable funding ratio as well as from a liquidity coverage perspective,” Cascarilla said.
Currently, if a bullion bank holding non-allocated gold assets, those assets are treated similarly as cash. Allocate gold assets are kept off the bank’s balance sheet and more likely recoverable.
The new platform also will provide same-day trade settlements and make sure that the gold and dollars move at the same time, according to Cascarilla. “This will improve the ability to trade gold and thereby improve the velocity of trading, which is good for market participants.”
Since Euroclear is an international central securities depository, it allows gold to move onto the collateral superhighway from a cross-margining perspective for assets already held at the clearinghouse,” he added. “Bankchain users will be able to settle their gold trades quicker while using existing collateral piping.”
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