Simplifying Trade Processing  with DAML (Part 2)
Posted by Patty Maurer on Nov 6, 2020 9:05:16 AM

New E-book from IntellectEU and Digital Asset addresses the latest challenges around clearing and settlement

 

 

November 6

In collaboration with IntellectEU, we explored numerous ways distributed ledger technology (DLT) and DAML can transform securities services, including clearing and settlement, KYC processes, corporate actions and more. Through a series of blogs we are sharing our analysis, highlighting what DLT and DAML can do for you today. In this two part blog series exploring the challenges of clearing and settlement.

In the previous post, we discussed how you can simplify trade processing with DAML, now we'll focus on optimization.

Another area in which DAML and DLT can optimize trade processing activities is in the context of simultaneous settlement, a workflow that would atomically settle inbound and outbound cash and securities movements. This would eliminate the need for central clearing parties to extend credit or incur additional risk. Through DAML and DLT, DAML structures are built to determine whether each participant to the transaction has sufficient assets to meet its obligations and process all component transactions simultaneously or not at all.

The use of DAML on distributed ledger technology not only simplifies the clearing and settlement trade processes, but it also enables capital market participants to envision a solution where beneficial ownership information is maintained without cumbersome reconciliation processes.

DLT on DAML solutions open additional synergies by design

Trade processing workflows (simultaneous settlement and committed settlement) maintain the legal and beneficial ownership data in real-time at settlement. In a market that builds such beneficial ownership ledger to track ownership titles, issuers would also be able to more easily connect and manage relationships with their investors. Through the use of DAML, this ledger would be able to interoperate with the KYC ledger to sync data living on that ledger.

If, for a given market, the central securities depository, the clearing house, and trading venue integrate on the same DLT infrastructure, different trade processing workflows can easily be designed and implemented to better fit the needs of various market participants. For example, a clearing house is no longer required if the traded assets are locked at order matching time before confirming the trade. The trade settlement cost will be reduced by the clearing house fee, there will be no more settlement risk and it will now be possible to settle the trade on the date of the trade.

In the end of the day, the immutable nature of DLT, along with its ability to create a secure yet logically shared environment in open or private networks, creates a system for financial transactions where multiple parties can engage simultaneously on processes, rather than waiting for each individual party’s centralized system to update. This eliminates duplicative operations while shortening the time between parties along the holding chain (a chain of “custody” service providers).

To learn more about the impact and opportunities of DLT and DAML in securities services – from account onboarding to post-trade settlement and treasury services - download a free copy of “Digitally Transforming Securities Services” E-book, co-authored with IntellectEU.

Download the eBook

New E-book from IntellectEU and Digital Asset addresses the latest challenges around clearing and settlement

 

 

November 6

In collaboration with IntellectEU, we explored numerous ways distributed ledger technology (DLT) and DAML can transform securities services, including clearing and settlement, KYC processes, corporate actions and more. Through a series of blogs we are sharing our analysis, highlighting what DLT and DAML can do for you today. In this two part blog series exploring the challenges of clearing and settlement.

In the previous post, we discussed how you can simplify trade processing with DAML, now we'll focus on optimization.

Another area in which DAML and DLT can optimize trade processing activities is in the context of simultaneous settlement, a workflow that would atomically settle inbound and outbound cash and securities movements. This would eliminate the need for central clearing parties to extend credit or incur additional risk. Through DAML and DLT, DAML structures are built to determine whether each participant to the transaction has sufficient assets to meet its obligations and process all component transactions simultaneously or not at all.

The use of DAML on distributed ledger technology not only simplifies the clearing and settlement trade processes, but it also enables capital market participants to envision a solution where beneficial ownership information is maintained without cumbersome reconciliation processes.

DLT on DAML solutions open additional synergies by design

Trade processing workflows (simultaneous settlement and committed settlement) maintain the legal and beneficial ownership data in real-time at settlement. In a market that builds such beneficial ownership ledger to track ownership titles, issuers would also be able to more easily connect and manage relationships with their investors. Through the use of DAML, this ledger would be able to interoperate with the KYC ledger to sync data living on that ledger.

If, for a given market, the central securities depository, the clearing house, and trading venue integrate on the same DLT infrastructure, different trade processing workflows can easily be designed and implemented to better fit the needs of various market participants. For example, a clearing house is no longer required if the traded assets are locked at order matching time before confirming the trade. The trade settlement cost will be reduced by the clearing house fee, there will be no more settlement risk and it will now be possible to settle the trade on the date of the trade.

In the end of the day, the immutable nature of DLT, along with its ability to create a secure yet logically shared environment in open or private networks, creates a system for financial transactions where multiple parties can engage simultaneously on processes, rather than waiting for each individual party’s centralized system to update. This eliminates duplicative operations while shortening the time between parties along the holding chain (a chain of “custody” service providers).

To learn more about the impact and opportunities of DLT and DAML in securities services – from account onboarding to post-trade settlement and treasury services - download a free copy of “Digitally Transforming Securities Services” E-book, co-authored with IntellectEU.

Download the eBook

Topics:

Smart Contracts, DAML, blockchain, clearing and settlement, securities services

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