Fintech Broadridge rolled out its repurchase agreement (repo) market trading platform this week and has already handled an average of $31 billion per day in transactions since its Monday launch.

Using distributed ledger technology (DLT) to build mutual provenance for collateral in the repo market, the New York City-based Broadridge is looking to capture market share by cutting operational costs and eliminating risk in a space characterized by heavy daily volumes.

The platform, which spent nearly two and a half years in development and pilots, uses smart contracts to automate trade execution in the repo markets. Smart contracts are computer programs set to execute when conditions associated with a contract are met.

While Broadridge, which was founded in 2007, did not specify which financial institutions have signed on to use its platform, there is “a healthy pipeline of interest,” Horacio Barakat, the fintech’s head of digital innovation, told Bank Automation News. Societe Generale and Natixis, a French corporate and investment bank, have already been involved in pilots for the repo platform.

Repo transactions are essentially short-term loans under which one party sells securities to another, with the promise to buy them back later at a higher price. Banks and financial institutions often use the repo market to raise short-term cash. The average daily volume for outstanding repo transactions in the United States was $2.6 trillion in 2020, according to Securities Industry and Financial Markets Association data.

Traditionally, repo market transactions face a time lag between agreement and execution as securities need to move around from one account to the other, Vinod Jain, senior analyst at research firm Aite Group, told BAN. While traditional transactions may take a day or two, settlement platforms like Broadridge’s can reduce that lag to just a few hours.

The offering aims to speed the transaction time by creating a common marketplace for the agreement, execution and settlement for such trades, using digital representations of collateral backing the transactions.

While a long-term transition toward digital currencies, such as central bank digital currency (CBDC) or widely accepted cryptocurrencies, could make the system more efficient, Barakat said, that’s likely to be a drawn-out process. He added that such adoption depends on regulatory developments and wide-scale adoption, and the DLT platform currently relies on traditional payment rails for settlement.

The digitization over shared ledgers establishes a common “source of truth,” Barakat said, thereby reducing counterparty risk. It also speeds the collateral’s mobility, which makes the transactions more efficient and frees up liquidity pockets that could otherwise go unused due to slower legacy techniques.

Broadridge is not the only player to leverage DLT for repo market transactions. JPMorgan Chase’s blockchain arm, Onyx, has also developed a similar offering albeit differentiated by its use of the firm’s internal payment token JPMcoin, which enables digitization of cash settlement as well. The Onyx platform uses JPM’s own blockchain and was trialed by the investment giant in conjunction with Goldman Sachs and BNY Mellon.

On the other hand, Broadridge’s offering relies on cloud computing firm VMware’s blockchain and digitizes only the collateral involved in transactions while relying on traditional payment rails for cash settlement. Broadridge selected VMware’s platform because of its “highly scalable” nature, Barakat said.

Denoting a growing trend in banks leveraging distributed ledgers for settlement purposes, NatWest, Deutsche Bank and Bank of Ireland also recently participated in a trial of a platform developed by U.K.-based startup Finteum for blockchain-based foreign exchange intraday swaps.

The $1.8 trillion Paris-based Societe Generale did not respond to a request for comment regarding its involvement by press time.

Shares of Broadridge [NYSE:BR] were trading at $160.86 at 1:30 p.m. today. The firm has a market capitalization of $18.6 billion.