BMO pilots blockchain for fixed income issuance

BMO pilots blockchain for fixed income issuance

Bank of Montreal's capital markets unit has piloted the use of a blockchain platform for a pilot fixed income issuance transaction.

The bank worked with the Ontario Teachers’ Pension Plan to test the use of blockchain technology for a Canadian-dollar debt deal. BMO issued, and Ontario Teachers' bought, a C$250 million one-year floating rate Deposit Note. Although the transaction was booked as a traditional issuance it was mirrored on the blockchain platform.

The bank used open source blockchain infrastructure to design and build the blockchain issuance system, which let the security issuer and buyer view the transaction and verify the accuracy of the term sheet information and payment amounts until maturity of the fixed income security.

BMO is hoping that the pilot will help build the case for blockchain and its ability to save costs in several areas including compliance, financial reporting, security clearing and settlement of cash transactions.

Kelsey Gunderson, head, global trading, BMO Capital Markets, says: "This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities."

BMO will now look to work with other partners "in the evolution of blockchain as an open settlement system".

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