Australia is likely to be one of the first countries in the world whose stock exchange adopts distributed ledger technology (commonly known as ‘blockchain’). BNP Paribas Securities Services, which has been there from the start, intends to take a ‘node’ from day one and provide real-time data.
A ‘node’ is just an information hub, allowing the provider to pass that information through its secure network. The current estimate is a launch date in second half of 2021.The benefits for investors and asset managers and owners from adopting blockchain technology are significant. Investors will be able to both save on costs and increase their revenue due to the greater transactional efficiency of blockchain.
For a global custodian bank, having an early lead on a new technology, thanks to Australia, means a lot. Australia’s BNP Paribas people’s learnings and experiences with blockchain are being fed into the company’s global network.
David Braga, the Australia and New Zealand country head of BNP Paribas Securities Services, which is an active member of the Australian Custodial Services Association, says that the ASX is doing a good job keeping all the custodians and participants informed through its business committee. “Most importantly for us, we see it as a multi-locations strategy. It takes on a wider remit.”
Luc Renard, BNP Paribas’ Hong Kong -based head of Banks and Brokers segment for APAC, says the bank sees Australia as a “global pilot program”.
“What we are building with the ASX will be used as a model with other countries… We believe the ASX has been very brave in being the first into the space. We see the potential for new technologies in the post-trade world, where we can make a ‘multi-party workflow’. Having a ‘one-source of truth data set’ is a very powerful tool which will allow us and our clients to save time and resources where before we would have had to refine data for the various parties in the workflow, he says.
There is also the notion of “smart contracting”, which is a blockchain concept and built-in feature. This means that securities servicing firms will be able to both bring workflows closer together and allow for greater automation. “For our clients, it means greater speed with corporate events, such as dividends, and trading, plus better security, as we will be able to reduce our timelines,” Braga says.
In other advances with handling corporate actions, BNP Paribas has built its own connection with the ASX to handle integration with the new SWIFT integration program, which enables the bank to manage the information from the time the issuer provides it, through to the time of the release of the information to clients. This is now a matter of seconds rather than hours or even days previously, when the protocol was introduced in 2018.
Luc Renard says that, similar to the blockchain technology, this process gives the information to clients as soon as the data is available on a real-time basis. But he adds that it is the information which is extracted from the data that is the most important, not so much the data itself. “It means the portfolio managers are better informed to make the right investment decisions,” he says.
Similarly, another recent advancement for super funds and managers, is to do with the development of DAAS (Data as a Service) technology, which has enabled BNP Paribas to offer clients a whole-of-fund view of the data across all of their providers. Braga says that super funds and some managers get both public markets data and private markets data from different providers. “What we do is giving them a single lens to look at it all… We see this as a service that not everyone will need but it provides an edge for the right types of big or particularly sophisticated clients.” This is a global service for BNP Paribas which is being developed in Australia.
Brokers and investment bankers are facing a lot of challenges, Luc Renard says. “Their revenue pool is shrinking and they have new competition from new players, such as digital platforms. And there are new capital requirements. It all requires increased investment to adjust to the changes.”
He says: “Many brokers are reassessing their operating model to see how they can move from a fixed-cost model to a variable-costs model and maximise revenue.. We have built a solution that does not simply address the traditional operational challenges but also responds to the growing focus on liquidity and capital requirements. We are also improving connectivity between buy-side and sell-side clients… We were the first clearer in Australia to enable brokers to access the Australian market remotely. Our innovative solution is helping brokers to re-think how they are able to access new markets efficiently. . We think ours will be the type of model that brokers and investment banks will consider in the future.”
David Braga says big funds and managers are increasingly putting in sophisticated toolkits, such as BlackRock’s Aladdin information platform for their front offices. “With respect to third-party clearing,” he says, “we are working on a solution for fund managers where we bring together a unique custody, clearing and settlement solution that has the potential to reduce costs and complexity for our clients”
Note: BNP Paribas Securities Services is a sponsor of Investor Strategy News