NYSE is pushing blockchain settlement infrastructure as tokenized securities inch towards live markets. This was indicated by Lynn Martin, the president of NYSE, who revealed that the exchange continues building settlement infrastructure using blockchain technology during his comments in Seoul. NYSE was also part of the July tokenization pilot conducted by the Depository Trust Company together with over 30 financial and digital assets firms.
The practical exercise involved the use of tokenized securities in the processes of equity delivery, Treasury trade, repo trading, securities lending, collateral posting, and margining. The participating firms included BlackRock, Goldman Sachs, JPMorgan, Nasdaq, Circle, Ondo Finance, Citadel Securities, and Vanguard. The pilot used DTCC private Besu network and the public Canton network.
Tokenized Securities Join Existing NYSE Market Structures
NYSE presented its proposed venue for tokenized securities in January via its parent organization, Intercontinental Exchange. The planned venue would utilize NYSE’s Pillar matching engine in combination with blockchain technology post-trade infrastructure. It will be designed for trading 24/7, instant settlement, fractional shares, orders in dollars, and payments in stablecoins, depending on regulatory clearance. The venue might provide opportunities to list tokenized securities and native blockchain assets.
At the same time, an April SEC filing defined the rules that enable certain tokenized securities to trade along with common stocks. These eligible securities should have identical ticker symbols, CUSIPs, rights, and privileges. Eligible securities include stocks from Russell 1000 and ETFs, tracking major indexes. However, the DTC pilot is running on a T+1 settlement model, not on the instant-settlement model of NYSE’s proposed venue.
DTCC Launch May Signal Further Significant Progress
After the July trades, DTCC will release its Tokenization Service in October through its current timetable of releases. The service is preceded by a no-action letter from the SEC staff in support of the service. In addition, NYSE teamed up with Securitize in March to aid blockchain-enabled securities in its planned digital market infrastructure platform.
This made Securitize the first announced digital transfer agent for the future market infrastructure. On the other hand, NYSE needs to give 30 days’ notice to its members before tokenized trades through the DTC pilot program. This highlights the gradual adoption of blockchain technology by traditional finance markets.
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