Paxos Trust Company, a regulated financial market infrastructure provider, announced Instinet and Credit Suisse settled US listed equities trades on a same-day settlement cycle (known as T+0) via Paxos Settlement Service. The trades occurred at 11 AM ET and 3 PM ET and were settled at 4:30 PM ET, demonstrating the platform’s ability to enable same-day settlement for trades conducted throughout the day. In the legacy system, settlement can only occur the same day if trades are completed before 11 AM ET, and therefore is rarely utilized.
Paxos Settlement Service is a private, permissioned blockchain solution designed to allow two parties to bilaterally settle securities trades directly with each other. The platform is interoperable with the legacy clearing system and can facilitate settlement on any time cycle. It is also the first live application of blockchain technology for the US equities market and enables the simultaneous exchange of cash and securities to settle trades. Paxos Settlement Service has been settling trades daily for more than a year, and is operating on the standard T+2 settlement timeframe. The same-day settlement was conducted with live trades to demonstrate the future capability of the platform.
Today, the platform operates under No-Action Relief from the Securities and Exchange Commission (SEC) Staff. Paxos will apply for full clearing agency registration with the SEC, and hopes to secure registration in 2021.
Charles Cascarilla, Chief Executive Officer and Co-Founder of Paxos, stated, “Settlement in US equities is opaque and laden with unnecessary delays, capital costs and expenses. We are working hard to improve settlement for the benefit of all market participants. An upgraded settlement system can create safer, fairer and more open capital markets that foster innovation. Modern technology makes the risks of the current system obsolete while also enabling greater trading liquidity with greater ownership transparency. Paxos has built the only alternative solution that significantly alleviates risk and offers immediate benefits for market participants.”
Emmanuel Aidoo, Head of Digital Assets Markets at Credit Suisse, commented, “Innovation in blockchain technology is incremental. We’re excited to make progress in forging a path to faster settlement times at lower costs in public equities. These advancements will ultimately benefit the broader market as more firms join the platform. We’re pleased to work with Paxos and Instinet to advance this technology, which will help unlock capital, increase liquidity and reduce risk over time.”
Luke Mauro, Global Head of Operations at Instinet Holdings Incorporated, added, “It’s natural for Instinet to be an active participant in the digital evolution of the settlement space. We’re excited to stress test same-day cycles on Paxos, because our long-term goal is to always offer our clients more choices, advanced technologies, and greater efficiencies in both their settlement processes as well as time horizons. This event was another strong proof point for Paxos’s effective application of blockchain.”
If granted a clearing agency registration by the SEC, the Paxos Settlement Service plans to provide the industry with greater flexibility around their settlement cycles, ranging from T+2 to T+0, optimized according to their trading and asset management strategies. Additionally, Paxos will run multilateral netting processes in real-time to ensure efficient, fast and transparent net settlement of transactions.
Cascarilla added, “We are committed to remaking the process of settlement in US markets. We’ll introduce significant financial benefits and achieve operational efficiencies with blockchain technology that will facilitate an open financial system. With Paxos, all market participants stand to benefit from improved settlement.”