Seven central securities depositories and SWIFT, the bank-owned cooperative for secure financial messaging services, are working together to progress standards in distributed ledger technology for post-trade.
The group aims to demonstrate how distributed ledger technology could be implemented in post-trade scenarios, such as corporate actions processing and voting, with existing standards. For example, they have defined the product requirements for electronic voting based on DLT that includes common standards (ISO 20022) and principles.
Stephen Lindsay, head of standards at SWIFT, told Markets Media: “Standardization creates a level playing field and allows the market to interact seamlessly.”
Lindsay continued that ISO 20022 is a messaging standard but also defines terminology across asset classes and corporate actions. “An agreement on using the same set of definitions and concepts is important, as they will be independent of the technology or data format,” he added.
The central securities depositories working with SWIFT are Abu Dhabi Securities Exchange, Caja de Valores, Depósito Central de Valores, Nasdaq Market Technology AB, National Settlement Depository, SIX Securities Services and Strate Ltd.
“The CSDs participating in the memorandum of understanding provide good coverage across geographies and market practices, as the post-trade world is fragmented,” said Lindsay.
Additional CSDs are expected to join in the coming weeks.
He added: “It is exciting that the CSDs have signed up to collaborate across their businesses. The doors are open for other CSDs to join.”
The International Securities Services Association (ISSA) recently included the group as part of a new work stream to focus on the use of digital assets in post-trade and publish findings in the second quarter of this year. A business framework will identify key definitions, classifications, services and post-trade service provider roles.
Thomas Zeeb, chief executive of SIX Securities Services and chairman of ISSA, said in a statement: “There is a lot of potential for DLT in securities processing and the work being led by the CSDs working group on DLT is tackling a key challenge related to emerging technologies, which is a clear lack of standards. As the industry evolves, DLT-specific standards such as ISO 20022, will provide a great foundation, in terms of both existing business content and approach.”
Last month The World Federation of Exchanges outlined seven areas that regulators need to consider when designing rules, standards and guidelines for using fintech in market infrastructure. This was the first position paper from the federation’s fintech working group which was formed last year with senior technology and innovation representatives from nearly 20 exchanges and clearers.
The paper said it is desirable to have global regulatory consistency based on international guidelines and principles.
"Notwithstanding the proactive nature of regulatory scrutiny from national as well as regional authorities, we believe it highly desirable for a globally harmonised approach in a topic as internationally relevant as fintech,"said The WFE. "Fintech is innately international with global applications and uses and therefore we believe any regulatory principles and/or guidelines should be developed at that global level."
Gavin Hill, head of regulatory affairs at The WFE, said in a statement: "The principles set out in this paper are also intended as a prompt for further regulatory and industry discussion to ensure rules, standards, guidelines and expectations are designed that appropriately fit the nuances of global markets operating in local jurisdictions."