HSBC today said it would join forces with the Singapore Exchange (SGX) and investment company Temasek to execute a blockchain pilot for a fixed income issuance. The conventional transaction will be mirrored on a blockchain platform.
The UK lender states this is the first trial focusing on Asia’s bond markets where the end-to-end transaction will only be on a blockchain. There have been other blockchain issuances, but in most cases, they weren’t handling the unique challenges faced in the issuance and servicing of fixed income securities in Asia.
HSBC and its partners want to provide tangible evidence where distributed ledger technology (DLT) can deliver a new level of efficiency, transparency, and risk management capability versus the existing market infrastructure.
Both parties in the bond transaction will able to view the trade on the blockchain and verify the term sheet data and payment amounts. The objective is to cut costs in multiple areas, including compliance, reporting, security clearing, and settlement of cash transactions.
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As a result, a complete securities lifecycle will be carried out using a private network. Each party in the transaction will be able to exchange documents online and follow the transactions’ status – from placing securities and receiving funds to the full execution of the issuer’s obligations to investors.
Other benefits, according to the lenders’ statement, also include the immediate and simultaneous transfer of assets, settling transactions in real-time, as well as reducing counterparty risks and the capital costs.
The test also makes HSBC one of the first asset global banks to process a full end-to-end transaction using blockchain technology. However, the move follows other banks in pursuing similar pilot projects.
HSBC is one of the founding members of Voltron, a blockchain-based open industry platform for digitizing trade finance documents on Corda, R3’s blockchain platform. Other participants include Bangkok Bank, BNP Paribas, CTBC, Standard Chartered, ING, Natwest, and SEB, with delivery partners Bain, CryptoBLK, and R3, with a view to attracting more member banks and companies.