Smart Distributed Market Infrastructure from the Digital Securities Depositary Corporation
The Digital Securities Depositary Corporation (DSDC) is a US entity that is set to launch a novel distributed market infrastructure (DMI). DSDC enables regulated financial institutions to come together for more efficient processing of securities in digital format. On day one, the focus is on streamlining cross-border securities transactions for US investors with a form of equity known as American Depositary Receipts(ADRs). ADRs are a 1 trillion USD market that provides a more convenient way for US investors to purchase shares of public foreign companies. With DSDC’s DMI this is now possible with lower transaction fees and more efficient processing of share entitlements and guaranteed backing of the underlying equity.
Alistair Jones, CEO of the DSDC and global custody specialist, explains “Over the last couple of years we have invested thousands of hours to define the optimal operating and risk management framework, the ideal integration points with time-tested services and standards, and a legacy-inspired governance model that embraces principles of decentralized organizations like ours. Above all, we have created an ecosystem of powerful financial institutions that are now preparing for the first live transactions between the US and the UK”.
Distributed Ledger Technology (DLT) has been rapidly maturing since the world's discovery of the Bitcoin blockchain. Incumbent market infrastructure providers have started a journey to explore how their systemically important infrastructure can be upgraded through this new technology. DSDC is free from legacy infrastructure burden, is positioned as a not-for-profit entity that acts exclusively in the interest of its users, and therefore it is ideally placed to introduce market-accepted DMI for regulated securities processes.
The technology to enable the DMI is provided by KALYP Technologies. KALYP is one of the oldest software houses that is exclusively focused on developing multi-asset, multi-jurisdiction DLT software for the post-trade industry.
Thorsten Peisl, CEO and founder of KALYP, adds “Our software has been designed from the ground up for use cases such as the one from DSDC. The software enables three key features: a register of securities and related reference data; an inter-firm workflow engine with selective transparency, immutable audit trails of any processing smart-contract-automated or offline processed steps; as well as a marketplace to identify the most competitive online provider for a securities service task in demand.”
Users of DSDC’s infrastructure can be any incumbent or new regulated financial institution qualified to offer one or multiple services for processing digital ADRs. These institutions sign up to become members of the DSDC, receive a software package to connect to and conduct business with other members, participate in the otherwise closed ADR market, and generate additional top-line revenue for their existing securities services. In addition, all members are invited to participate in the governance body of DSDC that efficiently steers the future evolution of the DSDC.
Mario Passudetti, Director at DSDC and ADR market veteran, explains “At the outset, the DSDC member network can be seen as a synthetic DR bank-like entity. It is a modern alternative to the legacy infrastructure of existing DR banks. However, we want to emphasize, the DMI is completely open to existing market players as well as new entrants with qualified licenses for the services they would like to offer.”
Due to the distributed nature of the DMI, the DSDC aims to fully empower its members to perform all services and functions and therefore removes itself from operational responsibilities. What is left is a very lean governance structure and an unregulated, low cost contracting entity.
About Digital Securities Depository Corporation
DSDC offers distributed market infrastructure delivering more efficient cross-border settlement of securities in digital format; initially Digital Depository Receipts (DDRs). Any regulated financial institution with an existing service required across the lifecycle DDRs provider is invited to apply and join DSDC and offer their security services. Thereby the DSDC offers existing firms to position their legacy services for the digital future. For more information, visit DSDC’s website at www.dsdc.net.
About KALYP Technologies LTD
KALYP Technologies is a provider of enterprise software for capital markets. Its distributed ledger-based software establishes a smart market infrastructure for regulated financial institutions and enables more efficient processing of securities in digital format. The firm is independently financed and led by a group of securities industry veterans and distributed ledger technology experts with an international presence between London and Boston. For more information visit www.kalyp.io.
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