Deutsche Börse, Swisscom and the three partners Falcon Private Bank, Vontobel and Zürcher Kantonalbank have succeeded in jointly settling securities transactions with tokenised shares via Distributed Ledger Technology (DLT). With this proof of concept, the partners demonstrate how the immediate and secure settlement of legally binding security transactions in shares of small and medium-sized enterprises (SMEs) could work in the future.
Within this proof of concept, the share registry of a real Swiss enterprise was digitalised using the platform of the start-up company daura, and the shares were then tokenised. To enable the execution of a delivery-versus-payment transaction based on DLT, money was made available in the form of cash tokens. Deutsche Börse provided the cash tokens in Swiss Francs through its subsidiary Eurex Clearing. The money was deposited as collateral in the central bank account of Eurex Clearing at the Swiss National Bank. In the following securities transactions, the banks acted as counterparties and exchanged securities tokens against cash tokens using DLT.
Deutsche Börse and Swisscom jointly designed and developed the IT architecture with the systems hosted on Swisscom’s infrastructure. Core elements were the digital share registry provided by daura and the application of Custodigit as a holistic solution for the custody and management of digital assets. The participating banks also provided important requirements for the integration of the transaction into their respective banking processes. In the preparation of the underlying legal framework, Deutsche Börse and Swisscom were supported by the law firms MME and Walder Wyss.
Two different DLT protocols (Corda and Hyperledger Fabric) were used for processing the cash and security tokens. A specific process («cross chain secure settlement») was followed for a step by step settlement to ensure that none of the parties had to make any advance payment during the settlement process. An open system approach was chosen for this project to enable a simple connection of further components or partners in the future.
«It is of strategic importance for us to further develop the possibilities for settlement of securities transactions using DLT. This brings us one step closer to our goal of enabling the financial services industry in Germany and in Switzerland to efficiently use the potential of this new technology»,
said Jens Hachmeister, Head of New Markets, Deutsche Börse Group.
This successful proof of concept is a further milestone for Deutsche Börse and Swisscom in building a comprehensive ecosystem for digital assets. A productive service offering remains subject to the approval of respective regulatory and oversight authorities and compliance with the relevant regulatory requirements and applicable directives.
Featured image credit: Deutsche Boerse
