Seven Principles for Post-Trade Processing of Tokenized Securities

Seven Principles for Post-Trade Processing of Tokenized Securities

 
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The Depository Trust & Clearing Corporation (DTCC), a post-trade financial services company, published a white paper titled “Guiding Principles for the Post-Trade Processing of Tokenized Securities”, where it outlined duties and responsibilities of platform and networks that are in the post-trade services business.


The paper arrives in the public sphere during a challenging time for financial services providers in the crypto field, as many regulating bodies call for heightened security to protect market stability.

Mark Wetjen, the Managing Director and Head of Global Public Policy at the DTCC says that “the crypto industry could use the principles laid out in the paper to form a good set of rules that would give traders confidence.”

Here is a summary of the seven principles outlined in the white paper:

  1. Legal Basis – Any platform that provides the post-trade service should have a clear legal framework in place, which clearly defines the scope of its activities.
  2. Governance Structure – Similarly to legal basis, a security token platform should have a set of rules and governance structure to support the running of the platform.
  3. Risk Management – Every security token platform must have a risk management strategy which defines all sort of potential risks e.g. legal, credit, liquidity, operational etc.
  4. Settlements – A platform should provide clear and certain final settlement.
  5. Security token issuance – In general, any platform should have a clear set of rules and procedures to ensure the integrity of issued securities i.e. strong accounting practices, safekeeping procedures and internal control.
  6. Security – As expected, any platform should have a robust system for security and safety.
  7. Recordkeeping – Set of rules and procedures should regulate how the platform treats confidentiality and privacy while allowing access to regulators and external auditors.

DTCC is in charge of the most derivatives trading in the world. It was reported last year that 15 companies, including the banking giant Barclays, joined DTCC’s testing program, which is a part of the development process to move to the next-generation platform based on the distributed ledger and cloud-based technology.