Future of Finance

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What CSDs can do about the tokenization of securities markets (25 November 2021)

Future of Finance Webinar with The Americas’ Central Securities Depositories Association (ACSDA) and Sponsors Percival Software, a leading provider of CSD Systems, to explore the nature of the threats and the opportunities that Tokenisation poses for CSDs.

Thursday November 25 2021, 14.30 – 16.00 UK time

Central securities depositories (CSDs) are a target of the tokenization evangelists. CSDs are in theory completely redundant in a system by which tokens are issued directly into digital wallets, transactions are settled token versus token (TvT) between digital wallets, changes of ownership are registered automatically on a distributed ledger, and holdings of tokens are safekept in digital wallets and serviced by smart contracts. How soon such a system could come into being is impossible to predict. What we know is that today the scale of the security token markets is trivial. A generous estimate is that token issuers have raised just US$10.3 billion since 2017, or 0.008 per cent of current outstandings in the global bond markets and 0.009 per cent of the current valuation of the global equity markets. Bitcoin alone is worth 110 times as much as the entire value of the global security token markets. In growing, tokenization faces many obstacles, including the lack of digital cash (as opposed to payment tokens) on tokenization platforms and a lingering degree of uncertainty about the legal and regulatory status of tokens. But both these barriers are now being cleared. The financial incentives – notably a lower cost of capital and the reduction of transaction and data processing costs to nugatory levels – to tokenize are strong. The additional revenue possibilities, in terms of expansion into privately managed, OTC-traded and illiquid asset classes – to say nothing of attracting new types of investor – are tempting for asset managers and asset owners. History shows that digitized markets can scale remarkably quickly. The sheer size of the global bond and equity markets means that even if tokenization garnered no more than a tenth of the market, on current valuations the global market would still be worth US$23 trillion. So it is prudent for CSDs to take the threat of tokenization seriously, formulate strategies to adapt to its potentially rapid growth and develop services that treat tokenization as an opportunity. That opportunities exist, not least to help securities market participants capitalize on the new possibilities opened up by tokenization, is a certainty. At this webinar, Future of Finance joins forces with the Americas’ Central Securities Depositories Association (ACSDA) and sponsors Percival Software, a leading provider of CSD systems, to explore the nature of the threats and the opportunities that tokenization poses for CSDs.

The topics to be discussed will include:

1. Where did security token markets come from?
2. How large are the security token markets?
3. What factors will drive the growth of security token markets?
4. What factors will retard the growth of security token markets?
5. Which asset classes are best suited to early tokenization?
6. Why are CSDs at risk of disintermediation?
7. What new business opportunities does tokenization present for CSDs?

The webinar will begin with short presentations by Chris Richardson, CEO of Percival, and Dominic Hobson, co-founder of Future of Finance, on how tokenization could affect CSDs and how CSDs can respond. The presentations will be followed by a panel discussion, with live questions from the audience, moderated by Dominic Hobson

The Panellists:

Jack McDonald CEO at Polysign

PolySign, Inc., is an institutional-grade custody and settlement platform for digital assets. Prior to PolySign, McDonald was a Managing Director at SS&C / Conifer. From 2015 to 2016, he served as the President and Chief Executive Officer of Conifer Financial Services. From 2008 to 2014, he served as the President and Chief Executive Officer of The Conifer Group, LLC. Before joining Conifer, Mr. McDonald spent five years with UBS Investment Bank, where he was a Managing Director responsible for the institutional equity business for UBS’s western region. Mr. McDonald started his career in finance with Schroder’s in New York as a Vice President of institutional equity sales.

https://www.linkedin.com/in/jack-mcdonald-2314011/

Andrea Tranquillini – Senior Post Trade Market Infrastructure Executive 

Andrea Tranquillini is a Senior executive and former CEO of financial market infrastructures, including the most recent European experiment and DLT based, ID2S.  Andrea carries close to 30 years of international experience gained across Europe with JP Morgan, BP2S, Clearstream Banking/Deutsche Boerse, Capco, the London Stock Exchange Group, VP Group and Orange, specializing recently in start-ups. He is probably the only person having worked for 5 European CSDs (Clearstream, Monte Titoli, globeSettle, VP, ID2S)

https://www.linkedin.com/in/andreatranquillini/

Moderator: Dominic Hobson Co-Founder at Future of Finance 

Dominic Hobson has worked for himself for 30 years. He was one of the founders of Asset International, a transatlantic financial publishing, events and survey business, which was sold in 2009. Since then, Dominic has contributed to the work of two data businesses covering financial markets, run a peer group network for hedge fund managers, and co-founded the Future of Finance, which hosts events on innovation in finance. As one half of Hobson Cardew, Dominic also provides consultancy services to a number of financial services businesses and market infrastructures.

https://www.linkedin.com/in/dominic-hobson-49b8222/