US-based investment management firm Vanguard announced on Thursday another step towards applying blockchain technology to digitize asset-backed securities markets. Through a partnership with technology provider Symbiont and in close collaboration with a large US ABS issuer, as well as BNY Mellon, Citi, and State Street, Vanguard managed to model the full lifecycle of an ABS settlement on distributed ledger technology (DLT) network by replicating end-to-end transaction flows.
With offices in New York and Amsterdam, Symbiont is led by a team of experts in capital markets and blockchain technology. “Vanguard is dedicated to providing innovative, world-class solutions that help advance the financial services industry,” said Warren Pennington, principal and head of Vanguard’s Investment Management FinTech Strategies Group.
“By digitizing and streamlining the ABS issuance process, we will be able to increase the speed and transparency of transactions while reducing costs and minimizing exposure to risk, which ultimately leads to a more efficient business model for future generations of capital market activity,” he added.
Vanguard and Symbiont have been working diligently with a large US ABS issuer and participants in the banking industry to improve the process of securitization of ABS issuances, according to their statement. The vision for pairing Symbiont’s Assembly DLT with smart contracts, self-executing contracts that are triggered when an agreed-upon event occurs, is to offer increased information flow, enhance price discovery and secondary market liquidity, and automate key corporate actions through the use of a common infrastructure that is open to all market participants.
Puneet Singhvi, FMI head and markets and securities services lead for Blockchain, DLT and digital assets at Citi said that the bank continues to assess new technologies, collaborating with our clients and partners, with a focus on making the risk transfer process across the industry more robust and efficient.
Automating and transforming the current capital markets infrastructure
Vanguard aims to transform and automate the current capital markets infrastructure, leveraging Symbiont’s DLT network. The pilot provides the technical and operational foundation critical to supporting an asset issuance on a distributed ledger network. Market dynamics, such as periods of sustained volatility and illiquidity, have highlighted the need for faster, increasingly transparent and more automated markets where digital capabilities can help alleviate liquidity and funding concerns.
Mark Smith, CEO at Symbiont, said that 2020 may be the year that, for the first time, market participants will see a live ledger-based issuance. Vanguard and Symbiont have been leveraging blockchain technology to improve capital markets since December 2017, when the firms teamed up to simplify the data distribution process.
In 2019, Vanguard went live with Symbiont’s technology to consume data for $1.3 trillion worth of funds. The partnership has enabled index data to move instantly between index providers and market participants over one decentralized database, resulting in improved benchmark tracking and cost savings for clients.