Blockchain delivers savings in bond trade

Fund manager Lombard Odier Investment Managers has completed a bond transaction, using blockchain, the immutable ledger for recording transactions. It made the transaction, believed to be the first bond transaction using blockchain, in a secondary market purchase of catastrophe bonds from Solidum Partners, a specialist in insurance-linked securities.

Lombard Odier IM portfolio manager for its insurance-linked securities team, Simon Vuille, commented: “Using blockchain markedly lowered the transaction costs relative to other DVP settlement methods where costs are prohibitive for transactions of this size. The technology mitigated counterparty risk and accelerated what would have been a partly manual settlement process, reducing what normally takes a few days to a matter of seconds. We hope that this blockchain transaction will be the first of many.” And Stéphane Rey, chief technology officer, Lombard Odier IM, added: “We are always interested in new ways of working and implementing technology that delivers value to the business. Through this blockchain transaction, we have learned more about using the technology and the more practical aspects that needed to be handled, not least legal and compliance to name a few. We are very pleased with the end result.”