BETTING ON BLOCKCHAIN: Rabobank, Concord, PGS complete first physical repo trade
A consortium including Dutch bank Rabobank, international trading firm Concord Resources and warehousing firm PGS has completed its first physical repo trade using a new blockchain platform.
Working with insurer AON and software developer Gen 10, the trade involved an aluminium position stored at PGS to be sold and re-purchased by Concord to and from Rabobank, a large trade finance and repo institution, over the platform.
The Concord aluminium billets, which were stored in a PGS warehouse in Delfzijl, the Netherlands, were traded with Rabobank in London.
The trade took fewer than five minutes and was completed remotely from a mobile phone. Because it involved directly connecting systems used by Concord and PGS, no re-keying of information was required.
The consortium aims to drive efficiencies, traceability and transparency in metals trading, specifically in the repo financing business. The new blockchain technology tracks the metal from the point of trade through to warehouse storage and end delivery, providing greater visibility for all parties involved in the transaction.
Prior to this, repo transactions were time-consuming, involving multiple email exchanges to agree price, logistics and timescales. Through the new blockchain platform, confirmation on completion of the trade is sent immediately, with no email exchange required.
According to Rabobank’s global head for structured inventory products, completing the trade on the new blockchain platform, called Repo:NOW, is a big step for the metals repo industry.
“Historically, it’s been a slow process but the technology now means we can complete large-scale transactions in a simpler, more time-effective manner with greater traceability,” Peter Zonneveld said.
As part of the transaction, Concord selected the metal to be financed at the relevant PGS warehouse location. Rabobank received the financing request, inputted the funding rates and pre-agreed allowances before sending back to Concord for final approval.
Trade terms were agreed and PGS warehouse systems were automatically updated in real time to transfer the metal from Concord’s ownership to Rabobank, with payment being processed.
The second leg of the transaction was then executed, with Concord re-purchasing the material from Rabobank and PGS systems transferring ownership back to Concord.
“Bank commodity funding of the supply chain is a justly complex process involving layers of documentation and emails, and this initiative will digitalize the process while reducing risk and building out trust, efficiency and enhance transparency,“ Concord chief executive officer Mark Hansen said.
“Concord wants to be forward-thinking in implementing technology solutions in our relevant metals markets,” he added.
The consortium was set up in December 2018 by Rabobank, Concord and PGS, with AON and GEN10 joining in July.
It plans to continue to build out the platform by adding additional counterparties that have a mutual interest in optimizing this area of the supply chain.
