Dutch investors NN Investment Partners and PGGM joined Rabobank Markets in the recent initiative. The project involved multiple €1 million one-week maturity commercial papers. Payments were recorded instantly on the Euroclear Bank’s infrastructure. Rabobank has been working on the pilot for two years, and the successful completion of the trial means it will look to offer the service across Europe.
Blockchain technology offers the security and efficiency of instant settlement instead of the standard two business day lag. While previously investors had to wait for payment if they sold the commercial paper, cash can now be managed in real-time. Successful development will enhance intraday liquidity for both investors and companies. It is hoped that using new technology will help businesses standardize and better manage cash flow and portfolio risk.
“Blockchain technology can boost intraday liquidity for debt securities, meaning our clients can manage their portfolio and liquidity risks in a truly real-time manner,” said Jacek Wieclawski, Head of Capital and Financial Markets Innovation for Rabobank Markets. He added: “By leveraging the mix of both blockchain and existing technologies, we managed to create a new market for our clients where public debt securities can be traded and settled instantly while keeping fund managers focused on managing investors’ money in real-time.”
Jurre Halsema, Portfolio Manager, Money Markets at NN Investment Partners, said the development “can create not only operational efficiency, but also further standardize a high volume market and thereby enhance liquidity and market access for all parties.”
The solution uses R3’s Corda enterprise blockchain.
Around the world, there have been numerous commercial paper issuances using blockchain. They include India’s YES BANK and a separate consortium of EIB, Euroclear, Santander and EY set up two years ago. ID2S is a blockchain-based Central Securities Depository owned by Orange and Citi, targeting commercial paper with several French participants. In China, Zheshang Bank issued $17 million in asset-backed commercial paper using blockchain in 2020.