Credit Suisse uses blockchain for trade settlement

Credit Suisse and broker-dealer Instinet have used the Paxos blockchain settlement service to settle a U.S equities trade on the same day that it was initiated. 

“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,” said Paxos CEO and co-founder Charles Cascarilla.

Typically, settlement time in the equities markets is T+2, which means that the sale is settled two business days after the trade is initiated. In T+2 settlement, some trades can be settled the same day they take place but only if they happen before 11 am. But Paxos’s settlement service cuts settlement time down to T+0, allowing trades to be settled the same day they take place no matter what time the initial buying or selling of the equities happens.

“We’re excited to make progress in forging a path to faster settlement times at lower costs in public equities,” said Emmanuel Aidoo, Head of Digital Assets Markets at Credit Suisse. “These advancements will ultimately benefit the broader market as more firms join the platform.”

The future of equities trading

Paxos’s blockchain settlement service paves the way for optimization in the equities markets. By reducing the amount of time that it takes for a trade to settle, business operations become far more efficient.

“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,” said Luke Mauro, Global Head of Operations at the broker-dealer Instinet.

Securities trading will most likely be digitized in the future, and one of the best ways to accomplish that digitization is to use blockchain as the transaction rail. During SEC Commissioner Hester Peirce’s fireside chat at the Security Token Summit, Peirce was asked if she believed that all securities would eventually be digitized. Peirce responded by saying that the digitization of securities seems to be inevitable at this point.

For the banking and finance industry, blockchain technologies can optimize several processes that have become outdated with the creation of new technology. Although only a select few are using Paxos’s settlement service at the moment, the amount of time and money that institutions could save by settling securities trades over the blockchain makes the transition to blockchain-based settlement services a move that is practically guaranteed in the future.