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Blockchain - Application to
Clearing and Settlement
Colin Kwan
COO of Magnr
Investment Bank of the Future
Formerly from UB...
What is Clearing and Settlement?
• Executing an order, “the trade,” declares the intention to buy or sell
a security
• “Cl...
Simple Settlement and Clearing
Credit Card Transaction
Source: www.futurepaytech.com
Securities Clearing and Settlement
Exchange
Clearing Service
Clearing
Participant
(Brokers)
Clearing
Participant
(Brokers)...
Fundamentals
• In order to sell a security/product you need to prove
that you have it
• In order to buy the security/produ...
Smart Contracts
The Contract needs to have:
• What the asset is
• How much/size/weight
• Value (currency)
• Ownership
• Te...
How Smart Contracts Work
Exchange
A B
Registry
Digitise the Land Deed
Buy House
Sell House Buy House
Get Token
Digitise Cu...
The Future is Here
• t0.com by Overstock
• Clearing and Settlement reduced to 10mins
• (the time it takes for a single con...
Why Use Bitcoin
• The clearing and settlement process will be far simpler as
transfers of ownership are established immedi...
Questions
Colin Kwan
COO of Magnr
Investment Bank of the Future
Formerly from UBS and Deutsche Bank
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Clearing and settlement using Blockchain

How can Blockchain solve the Clearing and Settlement problem?

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Clearing and settlement using Blockchain

  1. 1. Blockchain - Application to Clearing and Settlement Colin Kwan COO of Magnr Investment Bank of the Future Formerly from UBS and Deutsche Bank
  2. 2. What is Clearing and Settlement? • Executing an order, “the trade,” declares the intention to buy or sell a security • “Clearing and settlement” refers to everything that happens after that initial declaration to cause the actual transfer of assets and ownership • Instructions and trade-related information must flow between broker/dealers, the securities exchange, central clearing parties, custodial banks, and security depositories, so that each takes the necessary action at the right time • How well the process works depends upon how well information flows between all of the players Source: Harvard Research Group
  3. 3. Simple Settlement and Clearing
  4. 4. Credit Card Transaction Source: www.futurepaytech.com
  5. 5. Securities Clearing and Settlement Exchange Clearing Service Clearing Participant (Brokers) Clearing Participant (Brokers) 1. Trade ( T ) 2. Reporting 2. Notified Trade (T) 2. Notified Trade ( T ) 3. Net Batch Instructions (T+1) 3. Net Batch Instructions (T+1) Settlement Participant (Custodians) 4. Batch Instructions (non-novated) 6. Confirmation of DvP Transfer (T+3) Settlement Participant (Custodians) 6. Confirmation of DvP Transfer (T+3) 4. Batch Instructions (non-novated) Clearing House Novates the trades and acts as central counterparty Settlement House Settles novated and non- novated trades and conducts multilateral netting Central Bank Registry 7. End of Day Reporting (T+3) 5. Instructions to effect transfer of funds (T+3) Source: ASX
  6. 6. Fundamentals • In order to sell a security/product you need to prove that you have it • In order to buy the security/product you need to prove you have the funds • When it is bought/sold, the ownership is transferred • How well the process works depends upon how well information flows between all of the players
  7. 7. Smart Contracts The Contract needs to have: • What the asset is • How much/size/weight • Value (currency) • Ownership • Terms and conditions • Actions
  8. 8. How Smart Contracts Work Exchange A B Registry Digitise the Land Deed Buy House Sell House Buy House Get Token Digitise Currency Match Buyer with Seller Contract receives assets Contract distributes assets Clearing and settlement is automated Ownership is undisputed
  9. 9. The Future is Here • t0.com by Overstock • Clearing and Settlement reduced to 10mins • (the time it takes for a single confirmation on the blockchain) • Auto Clearing and Settlement is here to stay
  10. 10. Why Use Bitcoin • The clearing and settlement process will be far simpler as transfers of ownership are established immediately using • If using fiat, ownership could be guaranteed by Central Banks issuing “smart contracts” or digitised tokens (i.e. Bitcoin) thus making the creation of the more complex smart contracts is more efficient • Using Bitcoin enables cross border transactions instantaneously allowing trades on all markets regardless of geography and currency
  11. 11. Questions Colin Kwan COO of Magnr Investment Bank of the Future Formerly from UBS and Deutsche Bank

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