Introduction

This guide is designed to help you understand and effectively utilize the capabilities of the Collateral Utility, built on the Canton Network. This application enables users to manage bilateral collateral agreements, settle margin calls, and monitor posted collateral efficiently and securely.

Utility Overview

The Collateral Utility is a next-generation smart contract application for bilateral margin processing, leveraging the privacy-first and interoperable architecture of the Canton Network. It supports real-time margin workflows across counterparties, asset types, and jurisdictions, ensuring transparent and efficient collateral management.

Through the Collateral Utility, institutions can on-leger process key post-trade operations—such as collateral posting, and reconciliation—while maintaining complete data privacy. By combining smart contract automation with the Canton Network’s synchronization guarantees, the utility reduces operational risk, and enhances liquidity management.

Use Cases

• Real-Time Derivatives Margin Management

  A crypto hedge fund and an OTC trading desk enter into a bilateral ISDA-style agreement. The calculation agent continuously updates exposure using live market data. When a margin threshold is breached, a smart contract automatically issues a real-time margin call, validated against the latest mark-to-market (MtM) and haircut data. The counterparty can then fulfill the margin call instantly, streamlining the entire margining process.

• Cross-Border Swap Margin with Tokenized Repo Collateral

  A U.S. broker-dealer uses tokenized U.S. Treasuries (USTs) obtained through an intraday repo transaction to satisfy a margin call from a Singapore-based counterparty—even outside U.S. market hours. Through a Collateral Management App integrated with the utility, the broker:

  • Allocates the required assets

  • Locks them in real time

  The Singapore counterparty receives the collateral instantly, eliminating the need for pre-delivery or duplicate custody arrangements.

• Integration with Off-Chain Custodians

  An asset manager issues a margin call to a hedge fund using the Collateral Utility. While tokenized Gilts are settled on-chain, the hedge fund opts to fulfill the margin obligation through an off-chain custodian such as Fidelity. The smart contract records the terms of the agreement, dispute resolution process, and settlement deadline—providing a single, auditable source of truth for both parties, even in hybrid on/off-chain workflows.

Roles

The Collateral Utility operates without predefined roles. All workflows are fully symmetric, allowing any user to:

• Create a collateral agreement

• Settle a margin call

This flexible design ensures that counterparties can interact as equals, maintaining autonomy while benefiting from automated, verifiable, and real-time collateral management.