State Street has established a partnership with Paxos, through which it will integrate State Street custody services into the Paxos Settlement Service.
As part of the pilot testing, State Street, through its Digital and Alpha divisions was able to simulate the settlement and custody of shares on the Paxos platform and asset movements with Credit Suisse.
Paxos indicates that its Settlement Service is a modern clearing platform designed to tackle the challenges presented by opaque margin, slow settlement cycles and high costs in today’s settlement environment. Its private, permissioned blockchain is designed to enable two parties to settle securities trades safely through a modern clearing agency.
According to the project participants, State Street Digital and Alpha divisions, along with Credit Suisse, developed the workflow and system adjustments to test the potential for seamless T+0 settlement.
They report that the testing process confirmed the readiness of the Paxos platform to immediately deliver same-day settlement for industry participants. This contrasts with the evolution of the settlement lifecycle using legacy infrastructure, which offers the prospect of delivering T+1 settlement in 2024.
By leveraging Paxos Settlement Service for institutional settlement, State Street was able to send settlement instructions to Paxos for settlement while still delivering the required messaging to interface with existing settlement systems.
Commenting on the initiative, Charles Cascarilla, CEO and co-founder of Paxos, comments: “The Paxos Settlement Service will revolutionise core market operations as our modern infrastructure improves efficiency, reduces risk, increases innovation and provides transparency. Paxos technology shows how competitive clearing solutions can positively drive the market forward.”
Nadine Chakar, head of State Street Digital, says: “Our team is incredibly pleased to have collaborated with Paxos, Credit Suisse as well as State Street’s Alpha team on this exciting industry initiative to facilitate seamless T+0 settlement.”
She adds: “State Street Digital was created to help drive innovation and address the industry’s digital transformation, and this pilot is consistent with our firm’s broader focus on supporting clients across the front, middle and back-office.
“It also further validates that the use of blockchain technology will help automate the life cycle of a trade, reduce costs and could eliminate the need for the traditional reconciliation processes used in today's settlement environment.”
