The Depository Trust & Clearing Corporation (DTCC) has unveiled plans to explore the benefits of digitalisation in the public and private markets - specifically whether new technologies can strengthen post-trade processes and reduce risks and costs.

The market infrastructure body has outlined its proposals in two case studies that advance its efforts to evaluate new ways to enhance post-trade processes through the potential use of distributed ledger technology (DLT), asset digitalisation and other emerging technologies.

Project Ion seeks to build on DTCC’s efforts over the past several years to further optimise the settlement process in the public markets, while Project Whitney considers opportunities to provide increased levels of digitalisation throughout the private market asset lifecycle.

“DTCC has been a leader in the digital transformation of financial markets since our founding, and we’re building on that legacy of innovation with projects to strengthen post-trade processes,” said Mike Bodson, president and chief executive at DTCC. “These case studies reimagine the private markets lifecycle and the public markets settlement processes, and they could significantly modernise and enhance how trading activity is processed in the future.

"We look forward to working collaboratively with our clients, regulators and other key stakeholders as we advance these concepts in partnership with the industry," he added.

Over the past several years, DTCC has undertaken an analysis of its core clearing and settlement processes, aiming to further modernise the backbone of the US capital markets infrastructure. Project Ion explores whether the digitalisation of assets and application of DLT can accelerate settlement and reduce cost and risk for the industry.

DTCC is proposing an alternative digital settlement service, with the potential to offer the benefits of accelerated settlement, retain the advantages of central netting and prevent fragmentation of the clearing and settlement ecosystem. It has developed a proof of concept to validate the proposed business and operational concepts and is now engaging the industry to assess market demand.

“The financial services industry is in the midst of a technology revolution that offers an extraordinary opportunity to adapt and embrace new technologies and service models to prepare for the future of post-trade,” said Murray Pozmanter, head of clearing agency services at DTCC. “Project Ion is about working with the industry to further the value proposition on accelerated settlement leveraging new capabilities such as DLT and tokenised securities, and to learn how DTCC can best deploy these technologies to deliver additional value to clients and the industry.”

Recognising that companies are staying private longer and continue to see increased investor interest, Project Whitney is a prototype focused on exploring the potential for asset tokenisation and digital infrastructure to support private market securities; from issuance through secondary markets.

While public markets are highly efficient, that same efficiency is not enjoyed in the private market where many operating functions are still dominated by manual processes and the few digital solutions that are available exist in silos, so DTCC is working with the industry to assess the viability and value of a modern digital infrastructure supporting private market securities.

“The private markets are ripe for increased levels of automation and lack much of the infrastructure that has supported the public markets for decades - Project Whitney presents an exciting opportunity to leverage emerging technologies and develop completely new solutions from the ground up,” stated Jennifer Peve, managing director of business innovation at DTCC.

Both projects remain in the experimentation stage, and a decision to progress them will be determined following further analysis and feedback from the industry.

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