Depository Trust & Clearing Corporation (DTCC), the market infrastructure provider, is launching two studies designed at integrating digital ledger technology (DLT) in public and private markets.
The two projects, Ion and Whitney, leverage blockchain technology to improve the current business models. The former is a proof of concept (POC) that aims to validate an alternative, faster digital settlement service that maintains central netting and prevents fragmentation of the clearing and settlement ecosystem.
Stock market volatility in March resulted in a spike of margin calls as well as significant risk as a result of the current two-day (T+2) settlement requirement. The DTCC noted that its systems currently support one day and same day settlement, but “legacy operational industry processes and other factors have prevented the industry from moving beyond T+2.”
In 2017 when the market moved from T+3 to T+2, it was estimated that the industry saved around $1.36 bn in margin requirements. Other benefits could include optimising capital, reducing risk, improving workflows, and automation efficiencies.
On the private side, Project Whitney is DTCC’s prototype for a digitised private market infrastructure for each stage of private securities, from issuance to transfer. The theory is that security tokens among other solutions could eliminate much of the manual processes, leading to a smoother, more efficient market for private securities.
“The private markets are ripe for increased levels of automation and lack much of the infrastructure that has supported the public markets for decades,” said Jennifer Peve, Managing Director, Business Innovation at DTCC. “Project Whitney presents an exciting opportunity to leverage emerging technologies and develop completely new solutions from the ground up. We look forward to continuing our exploration of this area with the industry and in leveraging our vast infrastructure expertise.”
According to DTCC, both Project Ion and Project Whitney remain in the experimentation stage, and a decision to progress the projects will be determined following further analysis and feedback from the industry.
“Projects Ion and Whitney represent the next steps in our digitalisation journey,” Peve said. “Both serve as examples of practical experiments incorporating innovative technology and business concepts designed to strengthen post-trade processes and provide a resilient, secure and efficient post-trade infrastructure for the industry.”