Global Custodian Clearing and Settlement Issue 2018 | Page 15

[ I N - D E P T H
is likely to be incremental and will apply
to bits and pieces of post-trade process-
ing starting “two-plus years from now”
taking at least five years and more to be
ubiquitous.
“The [DTCC] TIW project aims for au-
tomated record keeping, lifecycle events,
and payment management for more than
$11 trillion of cleared and bilateral credit
derivatives,” says Kandula. “It will be a
stretch to imagine that the entire post-
trade lifecycle would be using blockchain
ASX commits to implement
DLT for the purpose of re-
placing CHESS
December 2017
technology, but, it will be an evolutionary
process.”
Full blockchain implementation is
perhaps more pertinent for those with
ageing or legacy clearing and settlement
technology.
“It especially makes sense where the
current infrastructure reaches obso-
lescence or in areas that lack market
infrastructure,” says Palychata. “For
instance, we are also investigating use
cases for derivative contracts or non-list-
ed instruments that do not benefit today
from the same level of automation than
listed products.”
As with any new hyped technology,
there is also the further challenge of har-
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B L O C K C H A I N ]
monisation with regulatory standards.
“It’s unlikely blockchain will completely decentralise clearing
and settlement in the near future, as there are many political,
legal and structural issues to address,” says Summerville. “But
what I do expect to see is more centralised structures applying
DLT technology. Eventually, I imagine that as DLT technology
evolves and is used more widely in other industries, the market
will become more comfortable with the concept of decentralisa-
tion, and with some current DLT technology issues addressed,
the clearing and settlement will eventually be seen as essentially
redundant.”
DTCC’s Peve agrees: “We believe it is too early to predict the
Software testing to com-
mence from the second
quarter of 2019
2019
Migration testing expected
to begin in June 2020, with
go-live slated for the first
quarter of 2021
2020 and beyond
“While at a conceptual level, the function of netting and
clearing could be carried out using DLT, the cost and risk
considerations of the ledger model need to be balanced
against the existing efficiencies of current infrastructure.”
JENNIFER PEVE, MANAGING DIRECTOR OF SOLUTIONS BUSINESS
DEVELOPMENT AND THE OFFICE OF FINTECH STRATEGY, DTCC
extent to which DLT can be applied to clearing and settlement.
Any market infrastructure provider looking to apply DLT to
an existing process should collaborate and implement best
practices to prevent technology silos from being created, which
could lead to the same reconciliation and interoperability issues
experienced today.”
The future of clearing is open to infinite possibilities but it will
require patience to get there.
Summer 2018
globalcustodian.com
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