Enabling security trading for private firms
Private Securities market is facing significant challenges due to traditional way of doing things including top pain points like: high settlement risk due to longer settlement cycle; multiple version of master book across issuers, syndicate members and investors; manual asset servicing (Manual payments of coupons and/ or dividends); potential counterparty risk; limited audit trail.
Blockchain enables issuers and investors to record private securities transactions through digitally representing a record of ownership, eliminating the need for paper stock certificates and significantly reducing settlement time. This allows issuers and investors to better compete with traditional firms and allows them to execute subscription documents online. By applying distributed ledger technology, investment banks can cut costs and increase revenues through new business models which enable new and profitable products and services.
A new way to transfer securities
Blockchain offers the promise of addressing some of the key challenges and pain points experienced by the private securities market over many years. There is a potential to apply smart contracts and distributed-ledger technology to minimize settlement risk, improve efficiency, effectiveness and transparency with ability to re-orient business model by creating new products and services for quick time-to-market.
The blockchain solution enables issuers, syndicate members and investors to successfully complete and record a private securities transaction by digitally representing a record of ownership. The digital securities (smart contracts) are evidenced by entry into a publicly distributed ledger and transfers of the digital securities can only be effected on that ledger. These digital securities can be programmed to automate both issuance and asset servicing, resulting into elimination of manual, lengthy, operationally inefficient and erroneous processes.
- Unified view of master book across all stakeholders
- Near real-time issuer, broker and institutional trade clearing and settlement cycle from the current T+3 to T+10 days
- Almost elimination of settlement risk (due to reduced cycle)
- Zero counterparty risk (due to smart contracts)
- Eliminate need for intermediaries (DTC or exchanges) to settle
- Automated asset servicing in the form of automatic coupon and dividend payments
- Fully traceable and auditable transactions
- Dramatically lower cost of issuance
- Reduce the administrative burden and the operational risks of the current largely manual multi-step process
Capgemini has worked on some of the world’s largest trading systems for capital markets firms and exchanges and understands the ways blockchain and distributed ledger technology can provide new opportunities for firms. Our proven approach to applied innovation lets you test out new ideas in an accelerated environment to meet the fast pace of change in today’s banking and financial services industry.
Talk to our blockchain payments specialists by emailing email@example.com or contacting an expert.