Capital markets News

SSImple launches DLT-based platform to address securities settlement failures

settlement multi currency

Yesterday SSimple announced the launch of its DLT platform as a new way to store and share standing settlement instructions (SSIs) used to settle securities transactions. The EU’s Central Securities Depositories Regulation (CSDR) for settlement came into force in February 2022, with up to €300 million in fines already imposed.

That’s not surprising because settlement failures create significant risk and are far less rare than one might expect. European regulator ESMA showed settlement fails were more than 12% for equities in April 2020.

However, despite the penalties imposed by new regulations, settlement failures persist. Clearstream reported that its settlement failure rate for 2022 was 10.57% based on volume but a whopping 58.76% based on value. Most of those figures relate to a failure to deliver securities, often because the securities are used as collateral and can’t be delivered on time. 

Nonetheless, Clearstream cash failures were 2.82% of volumes but 8.33% of values representing €95 billion. Euroclear did somewhat better in 2022 with overall volume settlement fails of 6.05% with failure to deliver cash at 0.33% of volumes.

In addition, as multiple jurisdictions start the move to shorten settlement times from two days to one day (T+1), there’s an urgent need to move away from sending excel spreadsheets and automating the process of sharing payment instructions.

SSimple’s DLT approach

SSimple won’t help with the failure to deliver securities but addresses the cash leg for post trade. It targets a range of intermediaries, including helping custodians and prime brokers to automate the SSI delivery process for buy-side clients. It incorporates rule-based logic to ensure the appropriate SSI is used for the right asset class.

Bill Meenaghan, the founder of SSImple is a State Street and DTCC veteran and member of the UK’s Accelerated Settlement Taskforce.

“Poor SSI data quality is not a new problem; it has been around for many years. But it is unlikely to be solved if we stick with the process that is in place today,” said Meenaghan, SSImple CEO. “I’m passionate about simplifying the complexities of the trade lifecycle and that has led me to explore innovative technologies to improve the efficiency and automation of SSIs. SSImple uses immutable DLT processes to enable real-time updates and greater transparency in the SSI process.” 

SSimple is based on R3’s Corda enterprise blockchain.

Outside of the securities world, blockchain is used elsewhere to share payment data. ACH is the most common method of electronic payment in the United States. National Automated Clearing House Association (Nacha) which operates ACH, has a blockchain-powered system, Phixius, to enable the exchange of payment-related information. Specifically, a signature matching the payment details is stored on a blockchain so that any shared payment data can be verified using the blockchain. So far, 10,000 businesses have taken advantage of the solution.

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