Synswap aims to provide a better infrastructure to the OTC derivatives market by replacing a fragmented, costly and inefficient post-trade workflow with a simplified and streamlined process.
Built on Hyperledger Fabric, Synswap’s MVP marks a milestone on the path towards the processing of derivatives with distributed ledger technology.
The demo simulates a peer-to-peer network run by its members, where each trading counterpart contributes nodes and deploys smart contracts to process its derivatives trades. Once a CDS is booked, smart contracts model the payoff and several steps of the post-trade workflow: matching, electronic confirmation, flows schedule generation, upfront and coupons payment, daily collateral calculation, netting, compression and default management.
The demo processes both non-cleared and distributed cleared CDS. Indeed, Synswap offers an innovative clearing model, where all risk mitigation techniques applied today by CCPs – including default management – are replicated and automated via smart contracts. This disruptive clearing system would remove clearing houses from the process, solving the growing concerns about CCPs becoming single points of failure in the OTC derivatives ecosystem.
Synswap provides each trading counterpart in this permisionned distributed ledger with a dedicated interface, allowing them to monitor in real-time their trades, exposures and collateral exchanged. The demo also simulates a regulator’s interface, displaying all CDS processed through Synswap, which aims to increase transparency in the OTC derivatives market and potentially remove the costly reporting step.
By using blockchain technology, Synswap proves with this MVP its ability to remove duplicative systems and to streamline the post-trade lifecycle of OTC derivatives, resulting in drastically lower costs and operational risks for the industry participants.
Following the successful release of this MVP, Synswap offers the possibility for market players to book a demo, while developing a beta version of its platform for OTC derivatives, across different asset classes.