Rabobank has completed the first real-time commercial paper (CP) transactions using blockchain technology, following a two-year pilot in partnership with Commerzbank and Euroclear.
Rabobank Markets executed multiple €1m, one-week maturity euro CP facilities from Rabobank Treasury in the Netherlands to Dutch asset managers NN Investment Partners and PGGM, settling instantly as opposed to the standard two business days. The papers have been issued out of the global Rabobank CP Programme with XS-ISINs.
“The pilot was the continuation of a successful Digital Euro Commercial Paper pilot transaction executed in December 2018 and powered by the Corda blockchain platform," commented Robert Ruisch, head of Commercial Paper Trading at Rabobank Markets.
How it works
The trade economics and settlement instructions were confirmed and matched in real-time using Corda-permissioned ledger-based application and operational flows delivered by Commerzbank. The security was issued in and settled against cash instantly on the Euroclear Bank’s infrastructure.
The transactions are the first of their kind, providing real-time liquidity to NN Investment Partners and PGGM for publicly traded debt securities on both primary and secondary markets.
“We were keen to work with Rabobank on this pilot in order to further push the development of this platform as it can create not only operational efficiency, but also further standardise a high volume market and thereby enhance liquidity and market access for all parties involved," said Jurre Halsema, portfolio manager, Money Markets at NN Investment Partners. "As NN Investment Partners we strongly believe in leveraging new technology to the benefit of markets in general and our clients in particular. We look forward to further participate in these innovative solutions and at an early stage be able to provide input in defining the future landscape of money markets.”
The technology offers the security and efficiency of instant settlement to asset managers investing in debt securities, helping them standardize and better manage cashflow and portfolio risk. Following the successful pilot, Rabobank Markets is working to offer the proposition to clients across Europe.
“When co-discussing innovation with our institutional clients, we learned that blockchain technology can boost intraday liquidity for debt securities, meaning our clients can manage their portfolio and liquidity risks in a truly real-time manner," said Jacek Wieclawski, Innovation at Rabobank Markets. "By leveraging the mix of both blockchain and existing technologies, we managed to create a new market for our clients where public debt securities can be traded and settled instantly while keeping fund managers focused on managing investors’ money in real-time.”
“Commerzbank’s previous blockchain commercial paper and bonds transactions demonstrated feasibility of digital assets creation and interoperability between traditional financial ecosystems and new types of assets," added Mark Andryeyev, head of Bond Syndicate and Trading at Commerzbank. "The recent transaction outlines the possibility to use new technology in combination with existing financial applications setup, allowing participants to achieve benefits in securities distribution without re-creating a bank from scratch.”
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