Enterprise software firm R3 and four of its member banks have built a prototype solution for issuance of Euro Commercial Paper (ECP) on R3’s Corda distributed ledger technology (DLT) platform.
Project participants ABN Amro, Commerzbank, ING and KBC collaborated with R3 to develop an operating model for an ECP issuance and trading marketplace. The model was built on R3’s Corda platform, a financial grade distributed ledger that records, executes and manages institutions' financial agreements in perfect synchrony with their peers.
The project demonstrated the ability to issue and sell ECP on a distributed ledger with the following benefits compared with existing systems and processes:
• Reduced costs of market intermediaries
• Reduced operational risk and inefficiency via a shared consensus view of ECP transactions on a distributed ledger
• Enhanced transparency of the ECP market for regulators
• Comprehensive solution for issuance and settlement of a security using DLT
The four project participants will continue working with R3 to move from experiment to possible production. This will involve engaging with leading software vendors, thought leaders in the short term debt instrument ecosystem, as well as the regulatory community to showcase the prototype and receive feedback for a possible production ready platform.
David E. Rutter, CEO of R3, comments: “Collaboration in pursuit of overcoming a shared industry challenge is the ethos that R3 was built on. As we continue to develop Corda the learnings from these proof of concepts allow us to ensure the platform can be applied to a vast array of different scenarios, processes and asset classes. This is another milestone in Corda’s journey to becoming the new operating system for financial markets.”
Ivar Wiersma, Head of Wholesale Banking Innovation at ING, comments: “We are thrilled that the outcome of testing the prototype was positive. It demonstrates that selling and reselling of commercial paper through on-ledger issuance provides clear advantages in terms of operational efficiency and transparency; it eliminates the need for intermediaries like central securities depositories and custodians which slow down operations, reduce transparency, and increase costs in the overall flow.”
Roman Schmidt, Divisional Board Member Advisory and Primary Markets at Commerzbank, comments: “The Euro Commercial Paper proof of concept is a material building block for the way new issuance can be created and distributed using distributed ledger technology. This milestone has proven that together with our ecosystem partners we can shape the future within capital markets.”
Anton Semenov, Principal DLT Business Analyst at Commerzbank, comments: “The proof of concept for design and implementation was executed in a pragmatic way, considering current infrastructure components, operational processes and regulations. Distributed ledger technology can extend existing applications and provide new services for the commercial paper market”
Dirk Hermans, Blockchain Adviser at KBC, comments: “It is important for KBC to understand the technology and possible consequences or opportunities for our business. With the technical support of R3 and its ability to facilitate collaboration between banks, we can progress faster and the European Commercial Paper project pushes forward the insights, as assets on ledger require extra, legal insights. Also R3 has a wide network and knowledge of blockchain related regulatory affairs.”
Giles Chapman, Head of Commercial Paper at ABN Amro, comments: “The results of the experiments are promising. We are looking forward to further explore the opportunities of blockchain technologies for our fixed income business.”