Digital Assets: Paxos’ Blockchain Conducts The First-Ever, Same Day (“T+0”) Equity Settlement
Paxos Settlement Service settled the trades in a pilot test.
According to an announcement on Tuesday, Credit Suisse (SWX: CSGN) and Instinet settled U.S.-listed equity trades, entered at 11 AM ET and 3 PM ET, on the same day at [4:30] PM ET via a same-day settlement cycle (“T+0”) conducted on the Paxos Settlement Service blockchain.
The settlement was a historic first because legacy systems can only settle the same day if the trades are conducted before 11 AM ET. This is an impracticable schedule and is therefore used only rarely. (PAXOS)
Paxos Settlement Service
Paxos Settlement Service is a private, permissioned blockchain solution. It enables the two parties to a trade to settle an equity trade directly with each other ensuring both delivery and payment.
For the first time, blockchain technology has been used in the US equities market to settle trades. Though Paxos currently operates on the standard T+2 settlement timeframe, it is capable of facilitating settlement on any time cycle.
The pilot test settlement between Credit Suisse and Instinet used live trades to prove the future capability of the system.
The digital evolution of the settlement space
“Settlement in US equities is opaque and laden with unnecessary delays, capital costs, and expenses,” said Charles Cascarilla, Chief Executive Officer and Co-Founder of Paxos. “Modern technology makes the risks of the current system obsolete while also enabling greater trading liquidity with greater ownership transparency.”
“We’re excited to make progress in forging a path to faster settlement times at lower costs in public equities,” stated Emmanuel Aidoo, Head of Digital Assets Markets at Credit Suisse.
Paxos will now formally apply for a full clearing agency registration with the SEC and hopes to secure registration in 2021.
If successful, Paxos intends to customize settlement cycles as per the requirements of industry participants – ranging from T+2 to T+0.
“We are committed to remaking the process of settlement in US markets,” stated Cascarilla. “We’ll introduce significant financial benefits and achieve operational efficiencies with blockchain technology that will facilitate an open financial system.”
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