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SIX develops distributed ledger to automate the bond lifecycle

17 March 2017  |  4688 views  |  0 Binary

SIX Securities Services has developed a distributed ledger-based bond issuing prototype which it intends to deploy.

In late September last year, the Swiss post-trade provider entered a partnership with Digital Asset Holdings to explore the application of distributed ledger technology in financial markets.

The prototype enables the issuing of bonds as smart contracts that specify at what dates coupon payments are made, for what amounts and how/when repayments occur. It includes the connection of the smart contract to the chain where buyers can allocate money by paying in digitalised currency to the address of the bond.

The bond markets are seen as fertile ground for the live production of digital ledgers, promising significant cost reduction through the removal of operational and reconciliation processes and the reduction of settlement/counterparty risk and associated capital requirements.

Interbank co-operative Swift has demoed a similar proof-of-concept for bond issuance across multiple geographies, connecting all participants to a trade on a single immutable network. SBI Securities and IBM and the R3 consortium have also been working to develop similar applications.

In October, SIX issued research which suggested that regulatory uncertainty and a lack of inhouse expertise are proving major roadblocks to near-term adoption, forecasting a six-year timeframe before industry-wide applications of the technology would see the light of day.

Thomas Zeeb, CEO SIX Securities Services: “Though still some way off for market-wide adoption, we are firmly of the belief that the potential shown here is promising - for us - and for the industry as a whole. I am convinced that what we have achieved with this approach could revolutionise several processes used by the Swiss financial services industry while sustainably securing our role in the provision of services throughout the Swiss value chain.”

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