The Depository Trust and Clearing Corporation (DTCC) has unveiled plans to explore the benefits of digitalisation in the public and private markets and whether new technologies can strengthen post-trade processes and reduce risks and costs. The proposals are contained in two case studies that advance the organisation’s efforts to evaluate new ways to enhance post-trade processes through the digitalisation of assets.
The case studies – Project Ion and Project Whitney – examine the potential use of distributed ledger technology (DLT), asset digitalisation and other emerging technologies. Project Ion seeks to build on DTCC’s efforts over the past several years to further optimise the settlement process in the public markets, while Project Whitney considers opportunities to provide increased levels of digitalisation throughout the private market asset lifecycle.
Over the past several years, DTCC has undertaken a series of analyses of its core clearing and settlement processes, aiming to further modernise the backbone of the US capital markets infrastructure. Project Ion explores whether the digitalisation of assets and application of DLT can accelerate settlement and reduce cost and risk for the industry.
As part of this effort, DTCC is proposing a future vision of an alternative digital settlement service, with the potential to offer the benefits of accelerated settlement, retain the advantages of central netting and prevent fragmentation of the clearing and settlement ecosystem. DTCC developed a proof of concept (POC) to validate the proposed business and operational concepts included in this initiative, and is now engaging the industry to assess market demand.
“The financial services industry is in the midst of a technology revolution that offers an extraordinary opportunity to adapt and embrace new technologies and service models to prepare for the future of post-trade,” says Murray Pozmanter, head of clearing agency services and global operations and client services at DTCC. “Project Ion is about working with the industry to further the value proposition on accelerated settlement leveraging new capabilities such as DLT and tokenised securities, and to learn how DTCC can best deploy these technologies to deliver additional value to clients and the industry.”
Meanwhile, recognising that companies are staying private longer and continue to see increased investor interest, Project Whitney is a prototype focused on exploring the potential for asset tokenisation and digital infrastructure to support private market securities, from issuance through secondary markets. While public markets are highly efficient, DTCC says that same efficiency is not enjoyed in the private market where many operating functions are still dominated by manual processes and the few digital solutions that are available exist in silos.
DTCC adds it is working with the industry to validate Project Whitney’s key concepts and workflows. This multi-phase project will assess the practical and commercial viability and value of a modern digital infrastructure supporting private market securities.
“The private markets are ripe for increased levels of automation and lack much of the infrastructure that has supported the public markets for decades. Project Whitney presents an exciting opportunity to leverage emerging technologies and develop completely new solutions from the ground up. We look forward to continuing our exploration of this area with the industry and in leveraging our vast infrastructure expertise,” says Jennifer Peve, managing director, business innovation at DTCC.
Both projects remain in the experimentation stage, and a decision to progress the projects will be determined following further analysis and feedback from the industry, DTCC says. “Projects Ion and Whitney represent the next steps in our digitalisation journey,” says Peve. “Both serve as examples of practical experiments incorporating innovative technology and business concepts designed to strengthen post-trade processes and provide a resilient, secure and efficient post-trade infrastructure for the industry.”
Mike Bodson, president and CEO at DTCC, adds, “DTCC has been a leader in the digital transformation of financial markets since our founding, and we’re building on that legacy of innovation with projects to strengthen post-trade processes. These case studies reimagine the private markets lifecycle and the public markets settlement processes, and they could significantly modernise and enhance how trading activity is processed in the future. We look forward to working collaboratively with our clients, regulators and other key stakeholders as we advance these concepts in partnership with the industry.”