Atomic Delivery-vs-Payment for Securities

Traditional T+2 settlement windows expose firms to counterparty default risk and market volatility. Blockchain DvP executes as an atomic swap: the asset and payment transfer simultaneously or not at all. This removes the need for costly collateral and guarantees finality in seconds.

• Real Example: The Australian Securities Exchange (ASX) explored DvP on blockchain to reduce systemic risk, aiming to replace its CHESS system.
• Impact: Transforms settlement from a risk-management headache into a predictable, automated process.

Manual reconciliation between custodians, brokers, and depositories is a major cost driver, prone to errors requiring expensive fails processing. A shared, immutable ledger acts as a single source of truth, automating reconciliation.

• Primary Benefit: Cuts post-trade operations costs by 30-50% by eliminating manual matching and fail management.
• Process Automation: Smart contracts auto-execute corporate actions (dividends, splits) and regulatory reporting, reducing FTEs dedicated to manual tasks.

Regulatory reporting is manual, fragmented, and audit-intensive. Every transaction on a permissioned blockchain is timestamped, immutable, and traceable, creating a perfect audit trail.

• Compliance Automation: Program regulatory rules (e.g., Reg SHO, MiFID II) directly into smart contracts for real-time enforcement.
• Audit Efficiency: Reduce audit preparation time from weeks to hours by providing regulators with secure, read-only access to the verified transaction history.

Traditional T+2 settlement creates a multi-day window of credit and operational risk. Atomic DVP ensures the transfer of securities and cash occurs simultaneously in a single, irreversible transaction. This removes the risk of a buyer failing to pay or a seller failing to deliver, a critical concern for CFOs managing treasury operations.

• Real Example: The Australian Securities Exchange (ASX) explored DLT to replace its CHESS system, aiming for atomic settlement to drastically reduce systemic risk.
• Benefit: Transforms settlement from a process of trust and reconciliation into a guaranteed, automated event.

Capital and securities are immobilized during the settlement cycle, tying up liquidity. By settling instantly (T+0), firms can reuse assets within minutes, not days.

• ROI Driver: A major bank pilot by JP Morgan Onyx and SDX demonstrated intraday repo transactions, allowing the same collateral to be reused multiple times in a single day.
• Quantifiable Impact: For a firm with $10B in daily settlement volume, moving from T+2 to T+0 can free up $20B in capital and collateral for reinvestment or to meet regulatory requirements, directly improving the balance sheet.

Post-trade operations are a manual, error-prone maze of matching ledgers between custodians, brokers, and CSDs. Blockchain creates a single source of truth.

• The Fix: All parties see the same immutable record of ownership and transaction status in real-time. Smart contracts automate corporate actions, coupon payments, and margin calls.
• Case Study: The Bond-i project by the World Bank and CBA demonstrated automated bond lifecycle management on a private blockchain, showing a path to reduce operational costs by 25-35% by eliminating reconciliation failures and manual intervention.

Regulators demand transparent audit trails. Blockchain's inherent properties provide a superior framework for compliance.

• Immutable Audit Trail: Every DVP transaction is timestamped, cryptographically signed, and permanently recorded, simplifying regulatory reporting (e.g., MiFID II, Dodd-Frank).
• Real-Time Transparency: Regulators can be granted permissioned access to monitor settlement activity and systemic risk in near real-time, moving from periodic audits to continuous oversight. This reduces the compliance burden and cost for financial institutions while increasing trust.

Justification begins with a controlled, low-risk pilot focused on a specific pain point.

• Target Area: Start with internal treasury operations, intra-group settlements, or a specific asset class like commercial paper or syndicated loans where bilateral DVP offers immediate value.
• Key Partners: Collaborate with a regulated DLT platform (e.g., SDX, ADDX) or a proven enterprise blockchain provider. Focus on interoperability with existing core banking systems.
• Success Metric: Measure reduction in failed trades, capital efficiency gains, and FTE hours saved on reconciliation. A successful pilot provides the hard data needed for board-level approval to scale.

Validate the technology and business logic in a controlled, low-risk environment. This phase is about de-risking the investment and building internal stakeholder confidence.

• Target Asset: A single, non-critical security (e.g., a private placement note).
• Key Benefit: Demonstrates atomic settlement (simultaneous asset and cash transfer) without disrupting core systems.
• Real Example: A European investment bank ran a PoC for corporate bond settlement, reducing the process from T+2 to real-time (T+0) and proving the technical viability with existing custodians.

Scale the solution to a live but limited internal workflow, focusing on measurable operational gains and cost savings.

• Target Workflow: Internal fund transfers between desks or cross-border settlements within the same institution.
• Key Benefit: Automates reconciliation and eliminates failed settlement penalties. Frees up operational staff from manual exception handling.
• ROI Driver: A major custodian's pilot showed a 70% reduction in manual intervention and query resolution for the piloted asset class, directly translating to lower operational costs.

Integrate the blockchain-based DvP system into core trading and post-trade operations for selected asset classes.

• Target Scale: All eligible securities (e.g., bonds, private equity) with a network of vetted partners.
• Key Benefit: Transforms settlement from a cost center to a strategic advantage. Enables new products like intraday repo and 24/7 trading.
• Final ROI: Comprehensive audit trail for regulators, near-zero settlement fails, and the ability to re-deploy billions in trapped capital. This is the stage where the 10-15% reduction in total settlement costs (as seen in industry studies) is fully realized.