Santander and LeasePlan have teamed up for the plan with Nivaura, a capital markets startup responsible for several blockchain bonds. Nivaura’s platform promises a single digital platform for creating bond documentation, building a book, printing and allocating the bonds, and making payments throughout the bond’s lifecycle.
The system can facilitate settlement of bonds through a blockchain or traditional capital markets infrastructure.
Avtar Sehra, Nivaura’s chief executive, estimates the platform will reduce the time spent on creating documentation by 80%.
“Securities are underpinned by legal contracts,” said Richard Cohen, Nivaura’s general counsel. “Nivaura uses a legal markup language that lawyers are able to use intuitively, but can be read and understood by computers, allowing them to automate the creation of documentation and everything that flows from it.
“The clearings systems, the stock exchange’s ISIN generation, the settlement systems at banks, and the paying agent for the lifecycle payments of the bond can all automatically make use of the data entered in that original contract because it maps to their systems.”
Allen & Overy was involved in the development. Latham & Watkins is also taking part.
For bonds settled via blockchain, the system allows instant settlement and easy tracking of assets’ ultimate owners.
As well as issuing new bonds on the blockchain, Nivaura also offers a system of “tokenising” securities. Securities are held in custody and a token representing the asset is created on a blockchain, allowing immediate settlement in the secondary market.
At present, few investors have the facilities to hold blockchain assets. But Nivaura is providing cryptographic storage facilities to custodian services.
Elsewhere in the world of blockchain, Commonwealth Bank of Australia and the World Bank’s blockchain bond product Bond-I can now be traded in the secondary market. The system, which was launched with a maiden bond issuance in August 2018, now supports secondary trading via the distributed ledger, meaning that securities transactions can be settled instantly.
And end to faxes
Banks are working just as hard to modernise their systems elsewhere. Syndicated loans are notorious for being one of the least effectively digitised primary markets. Philippe Boulas, global head of corporate banking operations at BNP Paribas, said: “For many deals, notices are still exchanged by faxes.”
A company called Finastra is teaming up with BNP Paribas, Natixis, NatWest Markets and Société Générale to create Fusion LenderComm. This allows each member of a syndicate to share and update others with their position securely and instantaneously using blockchain.
BNP Paribas aims to have the first agent positions published on LenderComm by July.
Only four banks are onboard with LenderComm, but Boulas hopes to see more join soon.
“We hope to see more banks and funds onboarding on Fusion LenderComm, both lenders and agents, and to connect their systems to it, allowing them to automatically update their positions in deals via the platform,” said Boulas. “We need to have banks working together, collaborating, and this project will really benefit the market as it will also help to create this community.”
Unlike Nivaura’s platform, LenderComm only deals with the exchange of information during the lifecycle of the deal, not with payments or settlement of the securities.
LenderComm is based on R3’s Corda system.
The system will join Credit Suisse’s Synaps as a blockchain driven syndicated bonds platform.