Dwolla to Replace ACH Payments in Chicago Mercantile Exchange

Chicago Mercantile Exchange & Chicago Board of Trade has made a deal with payment company Dwolla that will enable users of CME to make collateral payments during the trading day in real time.

With Dwolla’s involvement, traders can both send and receive collateral payments.

The exchange asks traders to meet margin requirements and traders must send this payment every time their margins get too low. Hence, having to wait 3-5 days produces a severe lag and often users end up losing opportunities.

Sunil Cutinho, President of CME Clearing, told the media that “Dwolla’s technology provides CME Group with an innovative platform to deliver secure and sophisticated payment services to our clearinghouse member firms.”

Some of the largest banks in the world, fund managers, and hedge funds are members of the CME. Enabling them with real time payments to the exchange clearinghouse will help Dwolla to get their foot into Wall Street, said Bloomberg in a recent article.

According to the Chief Executive Officer of Dwolla, Ben Milne, Dwolla has been working with CME and taking an interest in the derivatives markets since 2014, when it secured $9.7million investment from the CME Group.

With the help of Dwolla, collateral payments would be cleared within seconds. Under the current Automated Clearing House (ACH) system, it takes up to five days to process the same type of payments.

Dwolla has been propagating the idea US payment networks based on ACH is too slow compared to other national payment networks in most other developed countries. The company has also made some noise in the press about how their payment technology can replace ACH and bring America to the twenty first century.

Commenting on the collaboration, Dwolla’s CEO pointed out that the key reason is certainly is the speed of transactions, but his company might be cooking up a grand plan to replace the ACH system altogether. “We’ve got a lot of exciting work to do to not only replace ACH but wire transfers,” he indicated.