Published January 17, 2018
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Date: January 17, 2018
Categories: Financial Technology, OutsourcingPartnership, Technology, technology, Trading & Data
Keywords: SWIFT, CSD, MOU
SWIFT and central securities depositories join forces to demonstrate the value of standards in distributed ledger technology for securities markets, such as proxy voting and digital assets
SWIFT and seven central securities depositories (CSDs) have signed a Memorandum of Understanding (MOU) to work together to demonstrate how distributed ledger technology could be implemented in post-trade scenarios, such as corporate actions processing, including voting and proxy-voting. The group will investigate the types of new products that can be built using it, and how existing standards such as ISO 20022 can support it.
Au Dhabi Securities Exchange, Caja de Valores, Depósito Central de Valores, Nasdaq Market Technology AB, National Settlement Depository, SIX Securities Services and Strate Ltd are among the CSDs participating in the DLT project with SWIFT. Additional CSDs are expected to join in the coming weeks.
Today, securities processing, particularly in areas requiring multi-party contact, involve extremely cumbersome manual processes that can carry significant inherent cost and risk. As a part of the MOU, SWIFT and the CSDs have defined the product requirements for an e-voting solution based on DLT that includes common standards (ISO 20022) and principles.
“To ensure interoperability and smooth migration, it is crucial that new technologies support existing common standards such as ISO 20022,” says Stephen Lindsay, Head of Standards at SWIFT. “The promise of the technology on paper is great, but it is currently missing a key component around standardisation. There is clear value in re-using established business definitions and facilitating interoperability amongst DLT implementations, which this project will demonstrate.”
Other aspects of the MOU include fostering collaboration amongst the CSD community in DLT research and development, helping define the role of financial market infrastructure providers in markets based on distributed ledgers and; identifying, defining and developing additional use cases for DLT in a CSD environment and the post-trade landscape, such as services for different kinds of DLT-based digital assets.
In addition, the group will focus on creating and adapting common standards and principles for the use of DLT amongst CSDs and the financial industry, and promoting the adoption of those standards and principles to other parties, including regulators.
Confirming the importance of the CSD Working Group on DLT, the International Securities Services Association (ISSA) recently endorsed the group and included it as part of a new work stream within the Association’s existing Working Group on DLT, giving this initiative greater industry visibility. As a part of ISSA, the CSD Working Group on DLT will initially focus on digital assets with a goal to establish a business framework for how these assets could be used in the post-trade space. The framework will identify key definitions, classifications, services and post trade service provider roles. Findings from the use case on digital assets are expected to be published in Q2.
“We are very excited to welcome the CSD Working Group on DLT into ISSA,” says Thomas Zeeb, CEO, SIX Securities Services and Chairman, ISSA. “There is a lot of potential for DLT in securities processing and the work being led by the CSD working group on DLT is tackling a key challenge related to emerging technologies, which is a clear lack of standards. As the industry evolves, DLT-specific standards such as ISO 20022, will provide a great foundation, in terms of both existing business content and approach.”
“As the first market in the MENA region to enter into an agreement of this kind, this signing marks another significant achievement for ADX. The Exchange will open channels of constructive dialogue with various stakeholders to identify the common principals, standards and business rules needed for the successful implementation of DLT in post trade operations, with the aim of enhancing the speed and security of capital market transactions.”
Rashed Abdul Karim ALBalooshi, Chief Executive, Abu Dhabi Securities Exchange
"It is a highly rewarding experience being part of the group to face the challenges and opportunities that DLT means for our business, sharing knowledge and views from around of the world"
Alejandro Wyss, CIO, Caja de Valores
“DCV is interested in being up-to-date on the progress in DLT technology. This group of institutions –representative of the world market of securities depositories and industry providers- contributes engineers and analysts, which are experts in the business, standards and technology. Together, they will use DLT to find solutions that will finally facilitate interoperability between global operators of securities markets.”
Fernando Yáñez, CEO, Depósito Central de Valores
The reason why NSD is working on finding areas to use blockchain and FinTech in general, is due to the new post-trade technologies’ potential. Based on our experience, blockchain, smart contracts, and other FinTech solutions may significantly upgrade the quality of services provided to our existing and potential clients. In this context, international cooperation based on the win-win principle will considerably increase the efficiency of such findings and contribute to industry development in general.
Eddie Astanin, Chairman, National Settlement Depository, Executive Board
“There is a lot of potential for DLT in securities processing and the work being led by the CSDs working group on DLT is tackling a key challenge related to emerging technologies, which is a clear lack of standards. As the industry evolves, DLT-specific standards such as ISO 20022, will provide a great foundation, in terms of both existing business content and approach.”
Re-disseminated by The Asian Banker