Swift, CSDs to Develop Blockchain for Post-Trade

Abu Dhabi Securities Exchange, Caja de Valores, Deposito Central de Valores, Nasdaq Market Technology, National Settlement Depository (NSD), SIX Securities Services and Strate Ltd. signed a memorandum of understanding with Swift for the project.  Other CSDs are expected to sign up for the project.

The project will look at how distributed ledger can be implemented for post-trade activities such as corporate actions processing and voting. Post-trade processing usually involves contacting multiple counterparties through a manual system, which Swift says is a source of risk.

Stephen Lindsay, head of standards at Swift, said standardization is a key piece not just for the adoption of blockchain, but to ensure a smooth migration.

“To ensure interoperability and smooth migration, it is crucial that new technologies support existing common standards such as ISO 20022,” Lindsay said in a statement. “The promise of the technology on paper is great, but it is currently missing a key component around standardization. There is clear value in re-using establish business definitions and facilitating interoperability amongst distributed ledger implementation which this project will demonstrate.”

The agreement also provides CSDs with the ability to collaborate on blockchain research and development, help define the role of financial -arket infrastructure providers in blockchain-based markets and to identify and develop more use cases.

Lindsay says there are no plans yet for a pilot program as there is no timeline around the project, though he noted it is still in its early stages and could expand.

“Some work has already been done and more planned,” he says, “Swift has already met with the CSDs to discuss how best to explore the use of distributed ledger in post-trade. The process is still in its early stages.”

Both Swift and the CSDs are also working on creating and adopting standards for use of distributed ledger.

“The reason why the NSD is working on finding areas to use blockchain and fintech in general, is due to the new post-trade technologies’ potential,” said NSD executive board chairman Eddie Astanin. “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.”

Swift has dabbled in the distributed ledger space before with its proof-of-concept project around nostro accounts—foreign exchange accounts banks hold with counterparties—that involved more than 30 participants.