Capital markets News

DTCC explores posting fund NAV data on blockchain with JPM, BNY Mellon, Chainlink

DTCC chainlink funds

Today the DTCC announced the result of a proof of concept (PoC) that explored posting fund net asset value (NAV) data onto a blockchain. For the Smart NAV trial, the DTCC partnered with Chainlink Labs for technology and asset managers, fund administrators and custodians. Jennifer Peve, the DTCC’s Global Head of Strategy & Innovation, mentioned the project earlier this year when she discussed the DTCC’s views on tokenization.

The ten participants in the Smart NAV trial were American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JP Morgan, MFS Investment Management, Mid Atlantic Trust d/b/a American Trust Custody, State Street and U.S. Bank.

The focus was on distributing the data rather than collecting it. The DTCC already gathers the data from asset managers and distributes it via its Mutual Fund Profile Service I (MFPS I). So this was an extension of MFPS I. However, this trial hinted at a potential shift towards a more distributed data collection process. 

With more tokenization projects launching, the need to have NAV data on  chain is increasing. The PoC involved sending messages from the DTCC infrastructure via Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to the private DTCC Ethereum blockchain. In this particular case, it didn’t attempt to send data to other blockchains, but it could have. Once on the blockchain, any permissioned party can use the data.

Clients could access the data using three methods: an API, a single fund consumer smart contract, and a bulk consumer smart contract that updates the price and rate data for a set of funds.

Apart from the ability to access the data on-chain, the takeaways included receiving data in real-time and greater automation.

Future blockchain use cases

The DTCC described the Smart NAV functionality as being usable in ‘endless use cases’. One future trial might include applying the same model to disseminating key reference data. Another might be usage for workflow automation to rebalance portfolios. This kind of workflow was the subject of an Apollo and JP Morgan trial as part of Project Guardian. And the third future use cased might involve expanding the functionality to include data capture from the asset managers.

This isn’t the first time blockchain has been used for this sort of use case. In 2017 Vanguard partnered with blockchain firm Symbiont to use DLT to distribute index data. The solution ran for several years and might still be running, although Symbiont went bankrupt in late 2022.