US post-trade giant DTCC plans to develop and test a blockchain technology tool managing the clearing and settlement of repo transactions.

In a statement on Tuesday, the group said it will work with blockchain specialist Digital Asset Holdings, a company backed by Goldman Sachs and run by former J.P. Morgan executive Blythe Masters.

A repurchase agreement, repo for short, is a type of loan which has traditionally allowed banks to access short-term funding.

DTCC said repos were selected for the proof of concept because there is an opportunity to streamline the clearing process after a trade.

Most of the major banks and exchanges, including LME, ICE, CME and NASDAQ, have launched their own initiatives to investigate how they can leverage blockchain, the distributed ledger technology that underpins virtual currency bitcoin.

DTCC, which acts as the principal US securities clearing house, said it had chosen the technology because of its real-time information sharing capabilities, which allow firms involved in repo trades to view details almost immediately after the trade is executed.

It is hoped that the platform will enable buy- and sell-side firms to agree to repo trade details much more quickly, lowering risks and costs.

Mike Bodson, DTCC president and chief exec, reckons blockchain has the potential to "revolutionise" certain post-trade processes that are inefficient and complex.

"Repos are a great place to start," Bodson said. "There are absolute opportunities to make clearing in this area much more efficient."

The first phase of the pair's repo project will start immediately, developing a proof-of-concept and integrating it into the DTCC environment.

Future phases will include collaboration and testing with market participants.

Digital Asset Holdings is also working with the Australian Securities Exchange (ASX) on a new blockchain system for clearing and settling trades in the Australian equity market.