OCBC has become the first Singapore bank with intraday institutional lending capabilities as it seeks to maximise returns from its excess intraday liquidity.
This is done through reverse repurchase transactions (reverse repos) on J.P. Morgan’s Digital Financing application, built on the Onyx Digital Assets platform, where OCBC lends cash to J.P. Morgan and accepts tokenised securities as collateral. Such transactions can be completed within the day as the exchange of cash and tokenised securities through the blockchain is near instantaneous. In contrast, the exchange of cash and collateral typically takes at least one business day in the traditional repo market due to manual processes.
While Digital Financing has previously facilitated intraday repurchase transactions (repos) where a J.P. Morgan counterparty borrows cash, OCBC is the first external counterparty with the ability to execute reverse repos. OCBC’s first reverse repo on Digital Financing was completed on 11 October 2024 with a maturity of less than 120 minutes. At maturity, the principal cash amount was returned to OCBC together with interest, and OCBC released the tokenised securities back to J.P. Morgan.
In addition to the reverse repo, OCBC also executed a separate intraday repo as a cash borrower on the same day. This was OCBC’s first repo on Digital Financing and paves the way for better liquidity resilience; OCBC will now have an avenue through which it can borrow funds to meet pressing intraday liquidity needs. Both the reverse repo and repo were denominated in US dollars, but transactions denominated in euros are also currently supported on Digital Financing. Euroclear’s triparty service facilitated the securities tokenization process for the pair of transactions.
Mr Kenneth Lai, Head of Global Markets at OCBC, said, “Collaborating with J.P. Morgan’s Digital Financing for intraday repo provides OCBC with a powerful tool for intraday borrowing and lending of cash by harnessing blockchain technology. This improves our liquidity management resilience and allows us to put excess intraday liquidity to work. I envision that markets will only get more competitive and sophisticated, so the ability to optimise liquidity on an intraday basis to maximize returns can be a game changer. We are excited to participate in and to explore other opportunities to collaborate with J.P. Morgan on our joint digital agendas.”
Since its launch in 2020, Digital Financing has been actively used for intraday Repo transactions as banks have sought to build liquidity resilience. The number of intraday repos on Digital Financing has surpassed 1,200, totalling over US$1.5 trillion, over the last four years. Ten clients across Asia, North America and Europe have executed intraday repos on Digital Financing thus far, and the pipeline continues to grow as participants become more comfortable with this new technology. As banks seek to optimise their excess liquidity, and with the successful availing of reverse repos to OCBC, J.P. Morgan expects to see more of such transactions in the future.
Scott Lucas, Head of Markets Distributed Ledger Technology at J.P. Morgan, said, “We are pleased to collaborate with OCBC in demonstrating the ability and interest for lenders to participate in an intraday liquidity market. We are looking forward to further growth in this type of transaction.”
Olivier Grimonpont, Head of Product Management, Market Liquidity, Euroclear commented, "OCBC’s achievement to offer intraday institutional lending showcases its commitment to innovation and operational efficiency in liquidity management. The leveraging of blockchain technology marks a pioneering step towards faster, more resilient financial transactions, transforming how cash and collateral can be managed. This initiative sets a powerful example for the industry, highlighting how intraday liquidity can be optimised effectively to deliver intrinsic value."