Blockchain Clearing House Planned By Canadian Securities Exchange

Announcements, Blockchain | February 14, 2018 By:

The Canadian Securities Exchange (CSE) is planning to create a clearing and settlement platform powered by blockchain technology.

The CSE said the platform would enable companies to issue conventional equity and debt through tokenized securities, which would be offered to investors through security token offerings (STO). The platform would also provide real-time clearing and settlement that would cut costs and reduce errors when compared to conventional clearing services.

According to the CSE, it has yet to file an application with Canada’s regulators for the new platform, but has already licensed the necessary technology from New York-based Fundamental Interactions, which has extensive experience delivering blockchain solutions in the US and Asia.

The exchange has signed a memorandum of understanding (MoU) with Vancouver-based Kabuni Technologies, which plans to become the first company to issue STOs on a recognized securities exchange. Kabuni plans to file a prospectus with the British Columbia Securities Commission.

Canadian Securities Exchange CEO Richard Carleton said the platform represents an intersection between blockchain and the capital markets that delivers on blockchain’s promise to disrupt conventional transaction and record-keeping mechanisms, thereby providing tangible benefits for market stakeholders.

“By harnessing this technology, the potential exists to extend corporate finance beyond the limits of traditional equity and debt offerings,” said Carleton.

If approved, the CSE clearing house would serve as a rival to Canadian Depository for Securities (CDS), which has long served as Canada’s main securities and fixed income clearing and settlement hub. It is owned by the TMX Group, the country’s biggest exchange operator that operates both the Toronto Stock Exchange and the TSX Venture.

Lasy Year, TMX Group partnered with the Bank of Canada and Payments Canada to experiment with using blockchain technology to automate the securities settlement process. John Lee, TMX’s managing director of enterprise innovation product development, said the prototype for a digital ledger-based clearing system is in the process of being built, and testing could begin as early as the second quarter of this year.