DTCC to Launch Private Market Securities Platform
The Depository Trust & Clearing Corporation, the premier post-trade market infrastructure for the global financial services industry, announced a new platform to streamline the issuance, transfer and servicing of private market securities. As described in a new industry report, “Digital Securities Management: Bringing Private Markets Infrastructure Into the 21st Century”, DTCC’s new Digital Securities Management (DSM) platform will, subject to regulatory approval, for the first time, provide an industry-wide solution that offers common market infrastructure and standards across private markets. The platform represents the next major milestone in DTCC’s efforts to bring automation, standardization and efficiency to the private markets, building upon its Project Whitney case study.
JUST IN: We're launching a platform to #digitalize and #modernize the private markets, while enabling #tokenization of securities. Read all about it here: https://t.co/hspsbSlnFP pic.twitter.com/Dhgg5Zk0Nf
— DTCC (@The_DTCC) November 9, 2021
DSM will offer access to participants through both central and distributed infrastructure, leveraging a cloud-based architecture to enable the book entry recordkeeping of securities as well as support the burgeoning digital asset ecosystem by providing the option to create tokenized representations of a security.
“DTCC has a long history of innovating to make the global financial services industry more efficient, and we continue to explore new and emerging technologies to support the digitalization and tokenization of assets,” said Michael Bodson, DTCC President and CEO. “The DSM platform offers a unique opportunity to implement new technology and streamline processes in the private markets while relying on the secure and resilient infrastructure that we have long provided for the public markets.”
The new DTCC DSM platform will support securities through their full life cycle, and will provide broad benefits to the entire private market ecosystem including:
- reduced operational costs through standards and increased automation, including security identifiers;
- electronification of transfer restriction approvals;
- gross settlement as early as T+1; and
- cost mutualization of non-differentiated services, such as centralized stock record keeping and codification of transfer restrictions.
Further, DTCC is exploring the ability for broker-dealers to hold customer assets while relying on DSM as a “Good Control Location” for both traditional and tokenized representations of securities, subject to regulatory consideration and approval.
From launch, DSM will optimize primary issuance and transform secondary markets, creating new business model and distribution opportunities for participants while facilitating a digital asset ecosystem. Architected to be blockchain agnostic, DSM will initially interface with the Public Ethereum Network, but will incorporate additional public and private blockchain support based on client and market demand.
“DSM is capable of transforming the private markets, unifying an increasingly fragmented space under a common infrastructure that can automate manual processes, reduce costs and risks, and open up more opportunities for investors,” said Jennifer Peve, Managing Director, Head of Strategy and Business Development at DTCC. “DSM is the culmination of a hugely collaborative effort with our clients, industry representatives and other key stakeholders, whose feedback was critical in developing a solution to modernize, digitalize and ultimately transform the private market ecosystem.”
The DSM platform will initially support pre-IPO equity securities, and will expand into other markets, positioning it to become the platform of choice for funds, debt, real estate, loans and other private instruments that are underserved today from a market infrastructure perspective.
DTCC is currently in the production build phase of the DSM platform and, subject to final regulatory approval, is expected to launch the service in early 2022.
The addressable market for private company secondary transactions is up to $1.5bn.
SVP, Citi, Goldman Sachs, and Morgan Stanley will invest in the new company.
The opportunity to digitize private securities on a global scale is escalating.
Broker-dealer sees an opportunity in private securities transactions.
Growth of alternative investments has not been accompanied by the required technology and infrastructure.