Deutsche Boerse successfully tests DLT-based securities settlement
24 March 2021 Germany
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Deutsche Boerse, Deutsche Bundesbank and Germany’s Finance Agency have developed and successfully tested a settlement interface for electronic securities.
Securities settlement using distributed ledger technology (DLT) is performed with the aid of a “trigger solution” and a transaction coordinator in TARGET2, the Eurosystem’s large-value payment system, explains Deutsche Boerse.
Working with market participants, it has been demonstrated that it is possible to establish a technological bridge between blockchain technology and conventional payment systems to settle securities in central bank money with no need to create central bank digital currency.
Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Societe Generale were all involved in conducting the experiment.
During testing, the Federal Government’s Finance Agency issued a ten-year Federal bond (Bund) in the DLT system, with primary and secondary market transactions also being settled using DLT. The transactions carried out during testing are not legally binding.
According to Stephan Leithner, member of the executive board of Deutsche Boerse, new technologies are a key component in creating infrastructures of tomorrow that meet the markets’ needs.
“This project marks a major step towards more efficient securities settlement and securities digitalisation by combining new technologies with existing infrastructures in a smart way,” he says.”
Burkhard Balz, member of the Bundesbank Executive Board responsible for the Directorate General Payments and Settlement Systems, comments: “Following successful testing, the Eurosystem should be able to implement such a solution in a relatively short space of time – at least in far less time than it would take to issue central bank digital currency, for instance.”
Jutta Dönges, co-CEO of the Finance Agency, adds: “We are delighted to be supporting the development of this innovative technology with our know-how. The transactions between us and our counterparties were conducted very successfully.”
Securities settlement using distributed ledger technology (DLT) is performed with the aid of a “trigger solution” and a transaction coordinator in TARGET2, the Eurosystem’s large-value payment system, explains Deutsche Boerse.
Working with market participants, it has been demonstrated that it is possible to establish a technological bridge between blockchain technology and conventional payment systems to settle securities in central bank money with no need to create central bank digital currency.
Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Societe Generale were all involved in conducting the experiment.
During testing, the Federal Government’s Finance Agency issued a ten-year Federal bond (Bund) in the DLT system, with primary and secondary market transactions also being settled using DLT. The transactions carried out during testing are not legally binding.
According to Stephan Leithner, member of the executive board of Deutsche Boerse, new technologies are a key component in creating infrastructures of tomorrow that meet the markets’ needs.
“This project marks a major step towards more efficient securities settlement and securities digitalisation by combining new technologies with existing infrastructures in a smart way,” he says.”
Burkhard Balz, member of the Bundesbank Executive Board responsible for the Directorate General Payments and Settlement Systems, comments: “Following successful testing, the Eurosystem should be able to implement such a solution in a relatively short space of time – at least in far less time than it would take to issue central bank digital currency, for instance.”
Jutta Dönges, co-CEO of the Finance Agency, adds: “We are delighted to be supporting the development of this innovative technology with our know-how. The transactions between us and our counterparties were conducted very successfully.”
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