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Blockchain in the bond markets could be a Trojan virus that kills incumbents (20 April 2022)

A Future of Finance webinar with the banks, bond market professionals, issuers, investors, digital asset players and technology companies

Wednesday April 20 at 2pm UK time

Bond markets were a primary target of blockchain technologists. As early as 2017-18 bonds were being issued and auctioned on blockchains by banks and benchmark issuers, and proofs of concept continued throughout the blockchain winter that took hold in 2019. In the Spring of 2021, the European Investment Bank issued a tokenised bond on to a public blockchain without the intermediation of a central securities depository (CSD) or a custodian bank. For a time it looked as if that one deal might finally transform promise into reality. A year later, a familiar pattern is restored: experiments without lift-off. Issuances and transactions in high volumes are conspicuous by their absence from the tokenised bond markets, which remain a cottage industry in a global marketplace capitalised at more than US$120 trillion. True, a new breed of token exchanges such as ADD-X in Singapore and SDX in Zurich are now hosting bond issues, but they too are still proving the technology and technique works rather than riding a rocket ship. Fulfilment of the signal promise of blockchain technology – namely, cost-cutting through disintermediation – is proving worryingly elusive. The FinTechs and exchanges which have identified the bond markets as an opportunity ripe for tokenisation are careful to stress that they have no intention of disintermediating investment banks, CSDs, custodian banks or issuing and paying agency banks, or indeed anybody else. As if to emphasise this point, the R3 Corda blockchain that turns existing intermediaries into members of private, permissioned blockchain networks has emerged as the technology provider of first choice for bond market FinTechs. The alleged remark of Clinton adviser James Carville (“I want to come back as the bond market. You can intimidate everybody”) certainly seems to apply to FinTechs, whose reluctance to challenge openly the banking stranglehold on the bond markets is almost palpable. Instead, investors and issuers are promised a more efficient primary market process, with less use of paper documents and the telephone and more use of simultaneous and controlled digital access to useful information such as initial term sheets, contractual agreements, prices and holders of particular bonds. Yet it is possible that such modest ambitions could conceal a revolutionary outcome, if not intent. Bond market FinTechs could morph into information entrepots that displace CSDs, issuing and paying agency banks and custodian banks by a gradual process of encroachment into the crucial data flows that makes such intermediaries evidently redundant. Who needs a CSD or a custodian when you can issue bonds on to a blockchain in fully registered form and settle transactions the same day?  In theory, investors on a blockchain network can transact directly with each other without waiting for a bank to confirm it has received the cash or the securities. And nobody will need an issuing or paying agent when the coupons can be paid by smart contracts. All of these functions will be fulfilled by efficient data flows rather than by reconciliation of separate data sets. This Future of Finance webinar will ask whether the apparent timidity of the bond market innovators conceals something much more threatening to at least some of the existing intermediaries.

Among the topics to be discussed at this webinar are:

  1. Is progress as slow as it looks?
  2. Is there more progress on the financing side?
  3. What are the innovators looking to do?
  4. Is change possible without disintermediation?
  5. Where is the tokenisation opportunity?
  6. Is the opportunity really a data opportunity?
  7. Are the benefits of tokenisation sufficient to make it worthwhile?
  8. How does tokenisation work in practice?
  9. How helpful are regulatory and legal regimes?
  10. How difficult will it be for tokenised bond markets to achieve scale?

Panellists:

Stefan Bosshard, Product Head Fixed Income at SDX

Stefan Bosshard works as Product Head Fixed Income for SIX Digital Exchange, a regulated Exchange and CSD, where he is responsible for building, running and extending the digital bond offering. Prior to his current role, Stefan was Product Manager for the Fixed Income segments of the Swiss Stock Exchange, focusing on introducing innovative services for issuing and trading bonds. Stefan has more than 10-year experience in financial services, FMIs, and bond trading. He holds a Bachelor’s degree from the Zurich University of Applied Sciences in Financial Economics and is based in Zurich (Switzerland).

https://www.linkedin.com/in/stefan-bosshard-b24b777a/

Charlie Berman, CEO and Co-Founder at Agora

Charlie Berman is the CEO and Co-Founder of Digital Debt Capital Markets Ltd (“agora”) which was founded in late 2018 to develop technology for all participants involved in the full lifecycle of bonds from inception to redemption. At its core agora applies Confidential, Permissioned & Private Network Distributed Ledger Technology and smart contracts to provide solutions for longstanding pain points in the bond markets and usher in better processes and products.

https://www.linkedin.com/in/charlie-berman-7910a916/

Oi-Yee Choo, CEO at ADDX

ADDX a digital securities exchange on a mission to democratise private market investing. She has 20 years of capital raising and M&A advisory experience. Before joining ADDX, Oi-Yee was with UBS for 6 years, and was Head of Investment Banking for UBS Singapore.

https://www.linkedin.com/in/oi-yee-choo-a6b9732/

David Nicol, CEO and Co-Founder at LedgerEdge

David Nicol is the CEO and Co-Founder of LedgerEdge. David has 10 years’ experience building successful​ fintech businesses; he led the digital asset program at R3, an enterprise blockchain software company. Before R3, David was a product manager in IBM’s Watson Commerce fintech business, and a management consultant.

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

Raja Palaniappan, CEO of Origin

Originally from San Francisco, Raja spent the first 7 years of his career as a corporate bond and derivatives trader in London, working on the trading floors of Lehman Brothers, Nomura, and most recently at Credit Suisse.

The idea for Origin was conceived after observing the frustrations of clients during the corporate bond new issuance process and being inspired by other successful examples of the transformative power of technology in financial services.

Raja holds electrical engineering and biology degrees from the Massachusetts Institute of Technology.

https://www.linkedin.com/in/rajap86/

Marco Monaco, Strategic Project Director EMEA at Consensys

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

Moderated by 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/

For more information please contact Wendy Gallagher at Future of Finance on wendy.gallagher@futureoffinance.biz