Blockchain For Fixed Income Transactions Trialled By BMO And Ontario Teachers’ Pension Planbr>
BMO Capital Markets is a full-service financial services provider offering corporate, institutional and government clients access to a complete range of products and services. With approximately 2,500 professionals in 30 locations around the world, including 16 offices in North America, BMO Capital Markets works proactively with clients to provide innovative and integrated financial solutions. Its services include equity and debt underwriting, corporate lending and project financing, debt and equity research and institutional sales and trading, among others.
Ontario Teachers’ is an independent organization responsible for administering defined-benefit pensions for school teachers of the Canadian province of Ontario. It is Canada’s largest single-profession pension plan, with $189.5 billion in net assets. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an average annualized rate of return of 9.9% since the plan’s founding in 1990.
During the blockchain trial, the Bank of Montreal sold C$250 million ($190M USD) of one-year floating rate deposit notes to the Ontario pension fund and used blockchain technology to mirror the transaction. It was conducted to demonstrate how smart contracts and blockchain could be used for fixed income markets.
“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities,” said Kelsey Gunderson, Head of Global Trading, BMO Capital Markets. “We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients.”
The trial used a blockchain issuance system, designed and built by BMO Capital Markets, that allows the security issuer and buyer to view the transaction and verify the accuracy of the term sheet information and payment amounts until maturity of the fixed income security. The sytem is intended to enable cost reduction in several areas including compliance, financial reporting, security clearing and settlement of cash transactions.
“Ontario Teachers’ is committed to exploring technology and innovations that might improve our ability to serve our members,” said Audrey Gaspar, Ontario Teachers’ Managing Director, Treasury and Integration. “We are pleased to partner with Bank of Montreal in this pilot blockchain initiative.”
Earlier this year, JPMorgan Chase, Goldman Sachs, the National Bank of Canada, and other large firms launched a similar blockchain trial. The trial mirrored the Canadian bank’s $150 million offering on the same day of a one-year floating-rate Yankee certificate of deposit. The test used a platform that has been built using JPMorgan’s open-source blockchain platform Quorum.