A blockchain-based fixed income Pilot Transaction plan launched by BMO.

BMO Capital Markets has launched a fixed income pilot transaction. It will be mirrored on a blockchain platform, along with the leading pension fund investor – Ontario Teachers’ Pension Plan.

The Pilot Transaction

Demonstrating the utility of the blockchain platforms, the transaction of a CDN $250MM 1-year floating rate Deposit Note was made with Bank of Montreal as the issuer and Ontario Teachers’ as the buyer. This became the first ever Canadian dollar fixed income issuance. The pilot transaction was successfully brought in-tune with the blockchain and booked as a traditional Canadian Depository for Securities (CDS) issuance.

This pilot transaction was conducted to show the use of smart contracts and blockchains for fixed income markets. For the purpose of testing a next-generation settlement system, using open source blockchain infrastructure, BMO Capital Markets designed a blockchain issuance system. The security issuer and buyer are allowed to look at the transaction and verify the accuracy of the term sheet information on the blockchain with the help of this prototype. Also, verification of the payment amounts can be done through the mentioned prototype until the fixed income security matures. With the help of this technology, cost reduction will be done in compliance, financial reporting, security clearing and settlement of cash transactions.

Stepping Stone

Kelsey Gunderson, Head of Global Trading, BMO Capital Markets said,

“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities. We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients.”

Expressing his pleasure over the partnership, the Managing Director of Ontario Teachers’ Audrey Gaspar said, “Ontario Teachers’ is committed to exploring technology and innovations that might improve our ability to serve our members. We are pleased to partner with Bank of Montreal in this pilot blockchain initiative.”

 

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