Today Paxos announced that it processed the first blockchain post-trade transaction in the U.S. equities market between Credit Suisse and Instinet. The transaction involved the simultaneous transfer of title and payment or delivery versus payment (DvP). As previously announced, Société Générale will also be using the platform soon.
On the one hand, DvP would seem to offer enormous efficiency benefits such as no need for reconciliations. Plus the advantage of immediate or one day settlement versus two day settlement. However, most current settlement systems offer netting, which can reduce the liquidity requirements at any one point in time. The DTCC has highlighted this point, as have clients of the Australian Securities Exchange (ASX), which will also be offering instant settlement with its new CHESS settlement system.
The Paxos participants see the benefit. “Paxos Settlement Service introduces blockchain technology that’s compliant with regulations and allows us to take important strides towards evolving market structure and unlocking capital that is tied up in legacy settlement processes,” said Emmanuel Aidoo, Head of Digital Asset Markets at Credit Suisse.
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