The Canadian Securities Exchange is planning to launch a blockchain-powered platform to clear and settle securities trades, challenging the monopoly long held by TMX Group Inc. and its own ambitions with the technology.
This new clearing house, which requires approval from Canadian regulators, would allow companies to issue conventional equity and debt using a digital token representing a share in a business, also known as a tokenized security.
The CSE said using blockchain, best known for powering the underlying technology behind Bitcoin, will allow securities trades to be confirmed in real-time rather than two full business days for settlement under conventional systems, and reduce errors.
The traditional process used to settle accounts and clear trades is “slow, archaic and high cost,” said the CSE’s chief executive Richard Carleton, particularly compared to the other instant financial transaction systems used today, such as digital payments.
“We have the opportunity here to start from scratch with issuers that are prepared to basically bypass the traditional paper-stock-certificate system and move to these equity securities tokens,” he said in an interview.
This clearing house, if approved, would serve as a rival to Canadian Depository for Securities Ltd., which has long served as the country’s main securities and fixed income clearing and settlement hub.
CDS is owned by the TMX Group, Canada’s biggest exchange operator that operates both the Toronto Stock Exchange and the TSX Venture.
In October, the TMX Group announced it was collaborating with the Bank of Canada and Payments Canada to experiment with using blockchain technology to automate the securities settlement process. This project to develop a proof of concept for clearing and settling securities marked the third phase of the Canadian central bank’s Project Jasper looking at how digital ledger technology could transform payments in Canada.
The prototype for a digital ledger-based…