Murray Pozmanter
DTCC

Murray Pozmanter, managing director of DTCC and head of clearing agency services and global operations and client services, explains how collaborating on distributed ledger technology can ultimately reduce risk

There has been a tremendous amount of activity recently as different organizations unveiled new proofs of concepts and experiments leveraging distributed ledger technology. How do you see the implementation of this technology unfolding over the next five to seven years?

I think we’re going to see a lot of market participants trying to find the ideal area to roll this technology out. I think what we need to be more careful of is creating a siloed environment of different protocols. We need to see firms agreeing on how this is going to be rolled out, at least from a basic standpoint. You can build this system on a set of agreed protocols, but we don’t want see 50 different instances of this in the market, because then we’re not creating the consensus that we want to get to.

Many people have been focused on moving on trade settlement onto the blockchain to achieve T+0. Is that realistic? Is distributed ledger technology necessary to shorten the settlement cycles?

It could be realistic at some point to have T+0 settlement in the equity market, we already have it in the repo market. The reason it currently does not exist in the equity market has nothing to do with the technology that the market runs on. It’s more to do with market behavior and some of the specificities surrounding equity settlement, such as stock lending, trade breakdown which has to be given to retail customers. So it’s not a technological barrier that we need to get through. Blockchain could eventually be part of the solution, but it’s not a technological problem that we need to solve.

We’re moving from T+3 to T+2 now, and the industry could easily move to T+1 in the same way. T+0 would require more changes in the behavior surrounding the equity market, particularly around stock borrows and informing retail customers of trade breakdowns, as well as institutional trade breakdowns.

I do believe that we could get to T+0, it’s just not clear to me that the amount of market structure change that would be required to get us there is worth the expense, whether it would be with blockchain or any other technologies.

DTCC has been working with Digital Asset Holdings using distributed ledger platforms to manage clearing and settlement of repo transactions, and with Axoni and others to test distributed ledger to manage credit default swap trade warehouse implementation.

Why were these asset classes chosen first, and do you see other asset classes as potentially good targets to move onto blockchain technology?


As regards our work in the global trade repository space, we had a technology that we were looking to re-platform anyway. So it was a good opportunity to see if the blockchain could be a prime candidate for us to use as the underlying architecture for doing that re-platforming.

I think what you need to be careful of when considering the blockchain use cases is not just using the technology to re-platform for re-platforming’s sake. If there’s a replacement of technology already being planned, then it makes sense to look and see if it can be done more efficiently and more cheaply with the blockchain. Conversely, when you look at the repo case study, we’re not going to be re-platforming. In fact, we’re going to be looking to maintain as much of the current market structure as we can. That market already settles on a T+0 basis, but what we can do is netting on T+0, or enable intra-day netting with DTCC’s Fixed Income Clearing Corporation (FICC). The potential we see for blockchain in this market is to enable us to take that last step, having added to the existing infrastructure, and not having replaced it.

So the blockchain, rather than displace the intermediary is actually assisting it?

Absolutely. We’re going to see that in more and more places as people become familiar with how to use the technology and where the optimum use cases are.

There are certainly things that can be changed, employers that can be disintermediated through some of the market structure changes. Everyone is in agreement that it’s an opportunity to make some market structure changes and we certainly want to be at the forefront.

Interviews
The latest interviews from Asset Servicing Times
The UK’s pensions industry is facing challenges from all angles, but KAS Bank’s cost transparency dashboard is here to lend a helping hand, says Pat Sharman
Real Estate Investment Times

Visit our sister site
for all the latest real estate investment news

realestateinvestmenttimes.com
View interviews section
Features
The latest features from Asset Servicing Times
The next implementation phase of the BCBS-IOSCO margin rules is on the horizon, and the buy side could use it as a springboard for long-term gain
As technology developments shape the world around them, financial services firms are starting to adapt. This year’s Sibos conference outlined where the industry is settling in, and where there are still milestones to pass
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Rocky Martinez considers how AI can help improve post-trade processes, and how SmartStream’s new reconciliations solution is moving a step in the right direction towards helping firms keep costs at sustainable levels
New regulations, new competition and new cost pressures mean custodians and sub-custodians have more balls in the air than ever before
Mark Aldous, head of managed services for Delta Capita, discusses product governance and the need for more cooperation between manufacturers and distributors before the 3 January 2018
The past decade has seen significant change in securities services, but some challenges lead to lessons learnt, says Deutsche Bank’s Satvinder Singh
Artificial intelligence is already a reality in daily life, and it has a place in financial services, says Matt Davey of Societe Generale Securities Services
As technology has advanced, so too has the threat of cyberattack, and if financial services firms put a foot wrong, they stand to lose more than money
View features section
Country profiles
The latest country profiles from Asset Servicing Times
The Asian market may be improving on the harmonisation front, but the situation is still far from ideal. Experts discuss what there is still left to do
Brazil is hogging the limelight from its South American neighbours. But, although reforms are in full swing, there is still work to be done
Securities Lending Times

Visit our sister site
for all the latest securities lending news and analysis

securitieslendingtimes.com
No nation is an island, and the Polish CSD has post-trade services to cater to all of Central and Eastern Europe, says KDPW’s Iwona Sroka
In a region as geographically, culturally and economically diverse as Asia, funds passports have a tricky road ahead if they’re to redefine the industry
Amid cross-border restrictions and tightened belts, Luxembourg’s kingdom of real estate investment won’t be crumbling any time soon
The Chinese market has taken a knock to its confidence, but despite its size, it is still merely an emerging market, and must take these setbacks in its stride
Rich in sunshine, cork hats and tired clichés, Australia’s funds industry doesn’t buck the trend, boasting record levels of assets under custody
As the Saudi Arabian stock exchange finally opens its doors to foreign investments, the influx from abroad will be in baby steps, not leaps and bounds
View country profiles section