Vanguard Advances Blockchain Technology To Digitize Asset-Backed Securities Markets
US-based investment management firm Vanguard declared on Thursday another step towards applying blockchain technology to digitize asset-backed securities markets. Through an association with technology provider Symbiont and in close partnership with a large US ABS issuer and BNY Mellon, Citi, and State Street, Vanguard managed to model the full lifecycle of an ABS settlement on DLT (distributed ledger technology) 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 in a statement.
“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.
According to their statement, Vanguard and Symbiont have been operating diligently with a large US ABS issuer and participants in the banking industry to enhance the securitization of ABS issuances. The vision for pairing Symbiont’s Assembly DLT with smart contracts, self-executing contracts that are triggered when an agreed-upon event happens, is to allow increased information flow, improve price discovery and secondary market liquidity, and automate vital corporate actions through the application of a common infrastructure that is accessible to all market participants.
Puneet Singhvi, FMI head and markets and securities services lead for Blockchain, DLT, and digital assets at Citi stated in a statement that the bank proceeds to evaluate new technologies, associating with our clients and allies, with a focus on making the risk transfer process over the industry more robust and efficient.
Vanguard strives to change and automate the recent capital markets infrastructure, leveraging Symbiont’s DLT network. The pilot offers the technical and operational foundation crucial to maintaining an asset issuance on a distributed ledger network. Market dynamics, like periods of sustained volatility and illiquidity, have emphasized the requirement for faster, transparent, and more automated markets where digital abilities can assist in alleviating liquidity and funding concerns.
Mark Smith, CEO at Symbiont, stated in a statement that 2020 might be the year that, for the first time, market participants will view a live ledger-based issuance. Vanguard and Symbiont have been using blockchain technology to enhance capital markets since December 2017, when the firms teamed up to clarify the data distribution process. In 2019, Vanguard went live with Symbiont’s technology to use data for $1.3 trillion worth of funds. The collaboration has allowed index data to move directly between index providers and market participants over one decentralized database, ending in improved benchmark tracking and cost savings for clients.