DTCC | Post-Trade | Tokenised Securities

The Depository Trust & Clearing Corporation (DTCC), a global post-trade market infrastructure giant publishes a white paper that outlines the guiding principles for the post-trade processing of tokenized securities. An official DTCC press release announced about the white paper on March 13.

The white paper is targetted at regulators and other market participants. It identifies the unique characteristics belonging to the emerging tokenized security asset class and its market structure. The DTCC states in the press release:

“The market for trading crypto assets that are security tokens where the post-trade processing uses distributed ledger technology (DLT), has created a need for safety, security and reliability around these transactions to protect market stability.”

The company believes that a global policy standard that defines the traditional market infrastructures are often applicable. It is often useful for stakeholders in order to identify the legal and other types of responsibilities pertaining to a certain security token platform offering post-trade services.

Points noted in the White Paper

The “Principles for financial market infrastructures,” or PFMIs offering was cited as an example for useful guidance for determining such post-trade responsibilities, in the white paper. In saying so, the paper also draws attention to the point that the principles that have been created by international standard-setting bodies and other “existing regulations might not squarely apply.”

In such cases, the  DTCC advises regulators, security token platform operators, and other market participants, who can determine legal and other requirements based on the platform’s functions and services, along with the prospective risks involved. As per DTCC these could be divided into custody, principal, and operational risks.

The paper further continues by quoting international standards for traditional post-trade responsibilities worldwide in the context of security tokens and crypto assets. Pointing out the key principles that are needed to be enforced in order to foster market stability and investor confidence.

Including an  “identifiable governance structure, identifiable risk management procedures and systems, [and] identifiable procedures and systems to ensure settlement finality,” among others. Mark Wetjen — Managing Director, Head of Global Public Policy, DTCC, and Chairman of the Board, DTCC Deriv/SERV LLC said in a statement:

“ [U]sually [most people are] focused on what happens before or to the point of execution of a trade. But what occurs after a trade is executed is critically important and this […] has not been broadly discussed within the context of tokenized securities or crypto assets more generally”

Read more: Coinbase Pro Adds Support for Stellar Lumens (XLM)

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