Depository Trust & Clearing Corporation (DTCC), a giant of financial markets infrastructure, is studying whether distributed ledger technology (DLT) could accelerate its processing of securities.
DTCC revealed two projects Monday aimed at integrating DLT with capital markets: Ion, a proof-of-concept alternative settlement service and Whitney, a security token method of private securities issuance and exchange.
Ion in particular envisions a radical future for a company whose already-speedy clearing and settlement pipework routes nearly $2 quadrillion in securities every year – almost the entirety of the U.S. securities market.
Perhaps digitized assets might flow smoother with DLT, DTCC opined in a project brief. It argued that improving the settlement cycle would have cascading benefits for market participants.
Whether DLT is the right answer appears to be a matter DTCC has not yet fully addressed.
By DTCC’s own telling, Ion is a proof-of-concept that has not yet proved its core concept: that DLT can function at scale.
“To effectively convey proposed business concepts, UI/UX was prioritized over a scalable architecture,” DTCC said in the brief. Later in the brief, it said it is looking for the “appropriate technical stack” for Ion.
Much closer to functioning prototype – though still likely far from implementation – is DTCC’s Whitney. This project tries to broach the haphazard private securities market with security tokens.
Regulation D securities are not subject to the same rules or party to the same trading infrastructure as their public counterparts. That makes the markets for them far messier, according to Jennifer Peve, managing director of business Innovation at DTCC.
"The private markets are ripe for increased levels of automation and lack much of the infrastructure that has supported the public markets for decades,” Peve said in a statement. “Project Whitney presents an exciting opportunity to leverage emerging technologies and develop completely new solutions from the ground up.”
DTCC hypothesized that a comprehensive platform security tokens could provide a better private security marketplace. Issuance, distribution and exchange would happen on-chain – as would compliance checks – and everything would also be stored in off chain records, too.
Whitney ran this concept for 12 weeks on the public ethereum network. In that time, it hit trouble spots associated with high network activity – a scaling issue that Ion, its counterpart, has not yet faced.
Still, Whitney’s dry run appears to have given DTCC a roadmap. It will offer test APIs to partner firms and “iterate the prototype” for more blockchains, including Hyperledger Fabric and R3 Corda.
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