Friday, 7 July 2017

Tearsheet/Suman Battacharyya: Inside BNP Paribas’ blockchain-powered securities platform

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Inside BNP Paribas’ blockchain-powered securities platform

    BNP Paribas Securities Services and SmartAngels announced the creation of a blockchain-powered securities platform.

    Analysts say the moves will make private securities trades more efficient and secure.

Suman Bhattacharyya | JULY 07, 2017

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BNP Paribas Securities Services took another step toward making blockchain the underpinning technology for securities trading.

The subsidiary of BNP Paribas and crowdfunding company SmartAngels announced on Wednesday the creation of a blockchain-powered securities platform that will act as a share registry to let private companies issue securities on primary and secondary markets.

The tool is the result of a partnership struck last year between the two companies. It will register securities issued by SmartAngels’ client companies, a move the bank said will improve the efficiency and security of transactions. Clients will invest in non-listed companies, for which there is no electronic infrastructure to underpin securities transactions. BNP Paribas Securities has tested the technology through a proof-of-concept phase, and the company said it’s ready to move it into the mainstream.

“We’re at the stage where we want to go to the next level, which would be to develop the whole thing with all the features and make it public,” said Bruno Campenon, head of clearing, custody and corporate Trust America at BNP Paribas Securities Services. It could still be a couple of years before the platform goes public, he added.

For investors trading in private securities, distributed ledger technology offers the advantage of housing the information in a central place where it can be accessed by all stakeholders in the trading process.

“Whenever you want to use a central repository of information, it’s very easy to have it decentralized, so that people all over the globe can access it provided they have the protocol,” said Campenon. “It’s quite secure; cybersecurity is of major interest for the entire industry, and it’s fairly quick to develop complex algorithms and this gives the opportunity to be more agile.”

BNP Paribas and SmartAngels reportedly loaded the share registers of five clients onto the platform.

BNP Paribas’ moves mirror the actions of other players in the space that have experimented with blockchain technology to underpin securities trading, including Goldman Sachs, Barclays and the German Central Bank. State regulators are also on board to enshrine blockchain as a means to underpin securities trades. And in what’s been seen as game-changing legislation, last week Delaware passed amendments to a state law that will allow stocks to be traded on a blockchain.

Brad Bailey, research director at Celent’s securities and investments practice, said that when it comes to trading private securities, using blockchain will bring efficiencies to a process that’s traditionally relied on paper records.

“When people started mapping what the potential for blockchain was in the capital markets, this is one area where they said it could really help,” he said. “With the security of the distributed ledger, you have a record of who owns what.”

A recent research note from PwC said that distributed ledger technology holds great potential in asset management, given the potential to cut costs, reduce delays and ensure data accuracy. Bailey noted that although it’s still early days for the technology, regulators are likely to see it as a means to enable greater security and safety of transactions.

“As regulators look at these types of things, they’re pretty happy with them,” he said. ” There’s no way to change data and no opportunity for fraud; all that can be totally open to regulators or auditors to inspect.”
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