With the G7, the German stock exchange, Deutsche Börse, is laying the foundation for more efficient custody and registration of digital securities.
While the DAX is fighting for the 15,000 mark, the German stock exchange is already creating products for the future. Deutsche Börse has a new digital platform called D7 built up. From November onwards, digital securities will be issued on this, in keeping with the recently passed Electronic Securities Ordinance (eWPG). With this, the exchange wants to enlarge its business, make it more efficient and, above all, reduce costs and administrative work. In Europe, there have so far been platforms in Luxembourg or Ireland as comparable offers.
Digital securities for straight-through processing
Even today, securities are already traded digitally, but complex reconciliation processes have to take place within the company. Likewise, the registration and safekeeping of the securities had to be carried out in the same way up to now. The Deutsche Börse subsidiary Clearstream Banking AG is responsible for this in Germany. In this company, employees spend a lot of time checking physical documents, sorting them and filing them in an organized manner in archives.
From now on, Clearstream will have another task – one that is somewhat more adapted to the century. The company should be the basis for connecting the digital securities issue to the existing infrastructure on the one hand and to properly store the digital documents on the other. This is intended to further safeguard information such as the life cycle and security conditions. According to the German stock exchange, around 80 percent of the securities in Germany are compliant with the eWPG. This means that these could be issued in electronic form by summer 2022. The aim of digitization is to enable the same-day (faster) issuance of securities. Furthermore, these should be paperless and automated and “straight-through” are processed.
Good future music for blockchain platforms
Deutsche Börse board member Stefan Leithner is convinced of the groundbreaking direction of the new platform.
With D7, we are offering the financial world a next-generation digital securities post trading platform to tap the potential of a digital and decentralized financial world. It is not only time to digitize individual processes; for a stronger, more sustainable and digital future of the securities markets it is time to reinvent the post-trade space as a whole.
Therefore, the platform is probably also cloud-based and DLT-capable. These two characteristics emerge from the future plans of Deutsche Börse. Starting in 2022, it plans to create an offer in which financial products that are based on blockchain technology and are traded are registered with Clearstream. So far, the issuing of digital securities has excluded stocks. Nevertheless hopes to penetrate the German stock exchange into “additional classes of securities” in the future. This includes the derivatives business and bilateral loan agreements.
For D7 Deutsche Börse has worked closely with leading financial institutions such as Deutsche Bank, DZ Bank, Paribas and BNP. The necessary know-how was drawn on through partnerships with technology companies such as Microsoft, Digital Asset Holdings, VMware and R3.