NSD and CSD community advance Blockchain for post-trade

The CSD Working Group on DLT, which includes National Settlement Depository (NSD), and SWIFT announced that they have signed a Memorandum of Understanding (MOU).

In addition to NSD, the CSD Working Group on DLT includes Strate (the CSD of the South African Republic), SIX Securities Services (the international CSD located in Switzerland), Nasdaq (CSD in Baltics and worldwide CSD technology provider), DCV (Chile’s CSD), Caja de Valores (Argentina’s CSD), and ADX (United Arab Emirates’ depository).

The Memorandum of Understanding (MOU) is focused on the CSDs’ joint efforts to develop the applied use of blockchain technology in the post-trade sector. In particular, now, securities processing, particularly in areas requiring multi-party contact, such as corporate actions, includes highly cumbersome multi-stage procedures (for example, manual processing) that carry significant inherent costs.

As part of the signed MOU, product requirements for an e-voting solution based on blockchain that includes common principles and message exchange standards (ISO 20022) have been defined.

To ensure interoperability and smooth migration, it is crucial that new technologies support existing common standards, first of all, 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 goals of the MOU include fostering collaboration amongst the CSD community in researching and elaborating on technologies and services, including smart contracts, to account for and store promising digital assets, resulting from ICOs.

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 the new work stream within the Association’s existing Working Group on DLT, giving this initiative greater industry visibility. As part of ISSA, the CSD Working Group on DLT will initially focus on digital assets with a goal of establishing 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 2018.

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.

Rashed Abdul Karim ALBalooshi, Chief Executive, Abu Dhabi Securities Exchange: “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.

Alejandro Wyss, IT Director, Caja de Valores (Argentina’s CSD), added:

It is a highly rewarding experience being part of the group facing the challenges and opportunities that DLT means for our business, sharing knowledge and views from around the world.

DCV is interested in being up-to-date on DLT technology progress. This group of institutions which represents the global market of securities depositories and industry providers contributes engineers and analysts, who are experts in the business, standards, and technology. Together, they will use DLT to find solutions that will finally facilitate interoperability amongst global securities market operators,” said Fernando Yáñez, CEO of Depósito Central de Valores de Chile.

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