Pirum have successfully tested a DLT extension of their securities lending and repo post-trade solution. This DLT innovation would provide clients with an immutable, transparent, and distributable golden-record of their trades for reference, audit and other purposes, and builds on existing post-trade lifecycle workflow and automation, fed from well-established real-time client books and record data integrations.
Pirum are working with several technology stacks to model the stock loan and repo golden-record ledger and smart-contract lifecycle flows to benchmark features, performance, and interoperability - given the requirement to integrate with multiple industry DLT systems covering collateral, payments and settlement. (Enterprise Ethereum was included in the tests given its proven core stack, tools and prevalence in the financial industry).
During multiple client and fintech working groups we explored the return on investment (ROI) case of DLT and debated the benefits, challenges and risks involved. It became clear that the key challenges for post-trade DLT adoption are coordination, cost, risk management, capacity, performance, security and resilience.
In parallel, Pirum conducted a data study encompassing trading data from multiple industry participants. The results showed that match-rates were sometimes only around 87%, meaning up to 13% of transactions or lifecycle events would not reach the DLT layer without a human interaction. Clients that have fully adopted and embedded existing real-time post-trade lifecycle services are however achieving match and straight through processing (STP) rates of ~95%, further increasing to 99.8% once the full suite of services across vendors are rolled out and adopted.
Pirum’s approach to automate the full post trade lifecycle provides an immediate and non-disruptive solution to improve operational efficiency. It is built on existing messaging and integration technologies, whilst providing participants the optionality to interact and operate with emerging technologies such as DLT (without being wholly reliant on them) and avoid large IT investment, disruption and risk.
In the context of tokenized assets, the immediate benefit of DLT adoption is far clearer and Pirum are therefore already integrating and evolving quickly in this area. Pirum are also experimenting with how the benefits of DLT can be used today to solve existing industry challenges including standard settlement instruction (SSI) management to further improve settlement efficiency, reliability and reduce fails, penalties and unsecured credit risk.
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