Chainlink announced the completion of the second phase of its solution to address the inefficiencies in corporate actions. Twenty four institutions joined the trials, including ten financial market infrastructures such as the DTCC, Swift and Euroclear alongside major banks and asset managers, like BNP Paribas Securities Services, UBS and Schroders.
Corporate actions, such as dividends or stock splits, are hugely inefficient and very costly. Citi found that the average cost to the industry of processing a single event is $34 million, with the DTCC estimating a total annual cost of $58 billion. We’ll come back to the causes of these inefficiencies. The Chainlink solution could potentially make a significant dent in the costs by helping in the standardization process, but it doesn’t claim to solve every issue.
So how does the Chainlink solution address these inefficiencies? It says it creates a “unified golden record” of corporate actions which is attested by market participants. This can be used by smart contracts, custodians or other post trade systems.
It uses AI to process unstructured corporate action announcements and outputs them in a structured ISO 20022-compliant messaging format. If the data is incomplete, then some of the institutions may be in a position to add data and cryptographically attest to its accuracy. The system then saves the data on a blockchain and the messages are transmitted via Swift. Others can then consume those messages – including blockchain systems such as the DTCC’s or others.
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