Bank of Montreal’s capital markets team has begun testing the use of a blockchain platform for a pilot fixed income issuance transaction.
It worked with the Ontario Teachers’ Pension Plan to test the use of blockchain technology for a Canadian-dollar debt deal. The transaction was booked as a traditional issuance but was mirrored on the blockchain platform.
The pilot transaction was conducted to demonstrate how smart contracts and blockchain could be used for fixed income markets.
BMO Capital Markets used open source blockchain infrastructure to design and build the blockchain issuance system, which allowed the security issuer and buyer to view the transaction on the blockchain and verify the accuracy of the term sheet information and payment amounts until maturity of the fixed income security.
The technology is intended to enable cost reduction in several areas including compliance, financial reporting, security clearing and settlement of cash transactions.
“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities,” said Kelsey Gunderson, head of global trading, BMO Capital Markets. “We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients.”
BMO Capital Markets said it will look to continue to partner with clients and other institutions in the evolution of blockchain as an open settlement system.
To ease the compliance and reporting obilgations facing the industry, banks and financial services have began to turn to blockchain as the answer.
Earlier this year, South Korea was reported to be launching a new blockchain-based ID verification system for domestic commercial banks, while the Italian Banking Association (ABI) opened a pilot project on blockchain-based interbank reconciliations.
Santander and Broadridge Financial Solutions recently completed a first practical use of blockchain for investor voting, with solarisBank also launching a blockchain factory to form a technological and regulatory bridge between banking and blockchain.
The American Association of Insurance Services (AAIS) has also begun leveraging blockchain technology from IBM to automate regulatory reporting. The national not-for-profit insurance advisor has introduced the openIDL (open Insurance Data Link), which is built on IBM Blockchain. Using openIDL, AAIS said it will help streamline regulatory and compliance requirements while improving efficiency and accuracy for both insurers and state insurance departments.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
