Global Custodian Clearing and Settlement Issue 2018 | Page 5

[ T H E F I R S T L O O K ] Canadian group herald instantaneous blockchain settlement success Payments Canada, the Bank of Canada and TMX Group conclude that instantaneous equity settlement through distributed ledger technology is “feasible” A Canadian-led consortium has successfully demonstrated the instantaneous clearing and set- tlement of securities using distributed ledger technology (DLT). Payments Canada, the Bank of Canada, TMX Group, Accenture and R3 make up the group which has concluded that instantaneous equity settlement through distributed ledger technology is “feasible” in what could be a landmark moment for the securities services industry. According to the group the proof of concept is the first to integrate cash and assets to enable settlement on a distrib- uted ledger, the same technology that underpins cryptocurrencies. The result of the proof of concept was an instant, end-to-end equity settlement. “We have witnessed an impressive achievement and an important finan- cial technology milestone for Canadian capital markets with the successful transaction of tokenised securities and cash in their basic forms,” said John Lee, managing director, enterprise innovation & product development, TMX Group. “Many complex challenges remain as we move ahead, but we look forward to the crucial collaborative work necessary to effect substantive, transformative change in global markets.” The initiative named Project Jasper was set up to experiment with an integrated securities and payment settlement plat- form based on DLT. Previous phases of the project fo- cused on the clearing and settlement of high-value interbank cash payments using DLT; however, Jasper III – which explores an integrated payments and securities infrastructure – was delivered by Accenture, leveraging R3’s Corda DLT platform. The group said “the proof of concept allowed clearing and ‘delivery versus pay- ment’ settlement immediately, demon- strating that it’s possible to complete post-trade settlement on a DLT platform.” Global Custodian’s final magazine of 2017 carried the front cover title of ‘Blockchain gets real’ a nod to the pro- gress being made in the securities services industry with the technology. At the time, we pointed out initiatives in many low- risk processes such as corporate actions and proxy voting where many custodians had examples of successful testing. In 2018 however, we have seen a contin- uation of major breakthroughs includ- ing the Australian Securities Exchange (ASX) announcing plans to go live with a new equity post-trade system based on blockchain technology by the first quarter of 2021. Elsewhere, Northern Trust went live with a blockchain solution allowing firms to carry out audits of private equity life- cycle events, as it continues to expand its technological capabilities for alternative fund managers. While the Canadian Securities Ex- change (CSE) developed a securities clearing and settlement platform using blockchain technology. The latest move from the Canadian con- sortium in addition to CSE’s development has placed the country at the top of the leaderboard when it comes to innovation in financial services. “Project Jasper positions Canada as a leading innovator, the first to fuse assets and fiat currency on ledger, which is fundamental to moving towards produc- tion,” said John Velissarios, Accenture’s blockchain technology & security lead. “Canada is the first developed market to focus on a full-cycle, on-ledger, trade-set- tlement system — laying the groundwork for the Canadian financial market infra- structure to collaborate with similarly positioned global partners to derive new, mutually beneficial opportunities and benefits of DLT. Summer 2018 globalcustodian.com 5