DTCC has published guiding principles for the post-trade processing of tokenised securities, as it looks to promote safety and confidence around the new asset class.
The guidelines form the basis of a white paper for regulators and other market participants, outlining the post-trade responsibilities that should be undertaken to enhance security for token platforms.
These principles include demonstrating a legal basis for providing post-trade services for crypto assets, having an identifiable governance structure, procedures for risk management and final settlement, demonstrating resilience, and having issuance, custody and asset servicing capabilities.
“When most people think of markets and the trading of an asset, usually they are focused on what happens before or to the point of execution of a trade. But what occurs after a trade is executed is critically important and this issue has not been broadly discussed within the context of tokenised securities or crypto assets more generally,” said Mark Wetjen, head of global public policy, DTCC.
“In our view, these issues are fundamental to protecting investors and establishing trust in the safety and soundness of security token platforms.”
Tokenised securities, traded on a digital ledger, have been hailed as the future of trading new and existing assets by a number of custodians, including Standard Chartered, State Street and SIX Securities Services.
However, it remains unclear whether post-trade processing of tokenised securities will take place through an existing market infrastructure or pave the way for disruptors to carve out a space for themselves in modern finance. Tokenisation is already being explored to collateral, in order to solve some of the widespread costs of collateral mobility.
Deutsche Boerse’s Clearstream business is one of the main backers for HQLAx, a securities lending platform using R3’s blockchain technology, that allows collateral to become tokenised and held by a custodian without physically moving. Following a period of testing, the HQLAx platform’s technical set-up is close to being finalised, as is the legal and regulatory framework.