Home Refractory Paxos, State Street and Credit Suisse are testing approved blockchains for same-day trade settlement

Paxos, State Street and Credit Suisse are testing approved blockchains for same-day trade settlement

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Paxos started a new one Blockchain-based pilot in partnership with State Street that boasts same-day settlement times (aka “T+0”) for stock trading. Credit Suisse also took part in the pilot project.

Paxos CEO and co-founder Charles Cascarilla, billed as Paxos Settlement Service, said the private, permissioned blockchain solution “will revolutionize core market operations as our modern infrastructure improves efficiencies, reduces risk, increases innovation and provides transparency.” .

Using the Paxos settlement service, the pilot simulated a trade between Credit Suisse and State Street.

“Our team is very excited to be working with Paxos, Credit Suisse and the State Street Alpha team on this exciting industry initiative to enable seamless same-day (T+0) settlement,” said Nadine Chakar, Head of State Street Digital.

“It also further validates that the use of blockchain technology will help automate a trade’s lifecycle, reduce costs and could eliminate the need for the traditional reconciliation processes used in today’s settlement environment,” added Chakar.

Paxos strives for billing times

In finance, settlement times for transactions are measured in “T+” terms, which are understood as the date of the trade plus the number of days it takes for the trade to settle. For example, in the 1990s, financial markets ran in a “T+3” settlement cycle after the US Securities and Exchange Commission (SEC) reduced processing times.

This metric is often made highly visible during market stress and volatility.

With large swings in the price of certain stocks, which markets saw during the meme stock craze, long settlement times can mean dramatic changes in the price investors ultimately pay for a stock.

Today the standard is a “T+2” settlement time, but the aim is to reduce this even further after Robinhood has stalled to offset sluggish trading hours in 2021, the industry is de-risked and ripe for change said Vladimir Tenev, CEO of Robinhood, in a blog entry in February 2021.

Ultimately, with shorter settlement times, investors face far less volatility in the quoted price and the price paid.

This isn’t the first time Credit Suisse has turned to blockchain technology to settle stock trades. In April 2021, the bank tested a similar service with Paxos, resulting in a trade reportedly being settled in just an hour and a half.

Elsewhere, Bank of America and Wedbush Securities also leveraged Paxos’ blockchain offering to increase trading speed.

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