Introduction

Ledger Tradelink is a collateral management and off-exchange trading solution. It enables financial institutions, including Liquidity Providers (Exchanges), Asset Managers, and Custodians, to manage and monitor collateral, handle pledges, and settle transactions securely via APIs. The core advantage is that physical transfer of assets isn't always necessary; instead, HSM cryptographic proofs verify ownership of pledged assets.

Collateral management serves as a cornerstone of modern financial markets, providing essential mechanisms for mitigating risk and ensuring the smooth functioning of transactions across various asset classes. Its fundamental role involves the administration and oversight of assets pledged as security against potential defaults, thereby fostering trust and stability within the financial system.

Collateral plays a fundamental role in the smooth functioning of financial markets by providing a crucial mechanism for mitigating counterparty risk. It acts as a security or guarantee, ensuring that obligations can be met even if one party defaults. This protection is vital across a spectrum of financial activities, including derivatives trading, securities lending, and repurchase agreements (repos), involving a diverse range of participants such as banks, insurance companies, broker-dealers, pension funds, hedge funds, corporations, and asset managers.

Definitions:

Before diving into our documentation, there are some important definitions to consider:

In Tradelink account governance, we define three roles that drive the implementation of collateral account rules:

• Asset Manager: Buy-side entity trading on Exchanges by pledging assets on a Tradelink Collateral Account.

• Custodian: Custodian of the Collateral Accounts where assets will be pledged. Often referred to as collateral agent, e.g. qualified Custodian.

• Liquidity Provider (Exchange): Sell-side with whom the other parties have agreed to receive a credit line based on the guarantee of pledged assets on collateral accounts.

• Collateral account: on Tradelink (marked with prefix “TL”, e.g. TL-XXX-XXX-XXX) as an account type which holds digital assets for the purpose of pledging, and “collateral” as an amount an Asset Manager is willing to lock (pledge) with a Custodian, to have a credit line with an Liquidity Provider based on a predefined agreement among those parties.

• Pledge: is the commitment of assets in a collateral account to secure a collateral position with a Liquidity Provider, which is willing to provide a credit line to a client based on that guarantee.

• Settlement: is a transaction request raised by a Liquidity Provider when a client has completed trading on their platform and there is a resulting balance payable and/or receivable that needs to be transferred.