Case Study: Securities Clearing and Settlement

 

The Client

Central Clearing House (CCP), Central Securities Depository (CSD), Fund Settlement Bank, Securities Companies (Full-service broker) and other parties have many redundant jobs for reconciliation.

Business Need

For securities trading, at the end-of-day, market participants have to conduct post-trading processes. Currently, clearing and settlement activities have involvement of many intermediaries and go through so many steps that causes redundancy. Clearing and settlement costs the financial industry a whopping $50 billion each year, according to consulting firm Oliver Wyman.

Applying Blockchain to these processes can help participants reduce workload, cost and counterparty risk in post-trading thanks to shared data and transparency of ownership.

The Solution

  • FPT proposes using Blockchain-powered securities trading platform
  • FPT is responsible for Blockchain platform deployment & UI development.
  • Using private Blockchain for customer info, securities ownership, cash balance to create more transparency between participants.
  • Both securities delivery and fund payment come close to T+0 Settlement.

The Benefits

  • Removed multiple intermediate steps.
  • Reduced manually mutual reconciliation
  • Reduced business, reporting and auditing costs as well as counterparty risks

Technology Details

  • Using permissioned ledgers (private Blockchain)
  • Issuing asset-backed tokens for stock symbols
  • Inquiring data from Blockchain-based system to verify trading execution results before netting
  • Requiring multiple-signature of all participants to finalize results of netting and settlement
  • Processing both Securities delivery and Fund payment for a complete settlement
  • Paying attention on reference authority

Securities Clearing and Settlement