SWIFT Exploring Use of Blockchain for Removing ‘Friction in Corporate Actions’

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The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide, is exploring the use of blockchain technology.

On September 13, SWIFT announced that it it is working with “seven securities player” (such as American Century Investments, Citi, Vanguard and Northern Trust) on a project aimed at drivingefficiencies in communicating significant corporate events”; the project will “trial an ambitious solution powered by Symbiont’s enterprise blockchain platform.”

Here is SWIFT explaining the motivation for this project:

When an event takes place at a publicly traded company – dividend payments, exchange offers, mergers, Dutch auctions or other corporate actions – the information needs to be quickly shared with investors, creditors and all other key stakeholders.

Automation of these communications has improved in recent years, but it’s still heavily dependent on manual processes that create both added costs and risks for market participants.

The problem is compounded by the number of intermediaries – central securities depositories (CSDs), local and global custodians, fund managers, paying agents, etc. – which make up the investment chain. Each has to pass on information about the event and, because they follow different data standards, may communicate about it slightly differently.

This creates complexity for asset managers, custodians, brokers and other recipients downstream as they receive information about the same event from multiple issuers and, in some instances, with missing, contradictory or inaccurate data. They then have to manually comb through, compare and clean the data to arrive at a single accurate picture of the event so they can make relevant decisions.

Jonathan Ehrenfeld, Strategy Director at SWIFT, stated:

Major asset managers will have hundreds of custodian relationships, with assets and securities scattered across a wide range of counterparties. If there’s a corporate event, these asset managers and other intermediaries will receive information from all these sources, and this is where we start to see problems.

According to our analysis, manual activities – such as data cleansing, formatting and interpretation – account for around 30% of the costs involved in processing corporate actions,” says Ehrenfeld. “That’s why we are collaborating with our community to deliver a solution that delivers accurate corporate action data to market participants in near real time.

For this trial, SWIFT is using enterprise blockchain platform “Assembly” from Symbiont; this platform allows financial institutions to “issue, track and manage financial instruments, such as collateral, commodities, data, loans and securities.”

SWIFT says that is is trying to “further automate and increase the accuracy of the corporate action workflow” by using Assembly’s “smart contracts and blockchain capabilities” to “create a network effect that leverages the 11,000+ institutions connected to SWIFT globally.”

Tom Zschach, Chief Innovation Officer at SWIFT, had this to say about the use of Symbiont Assembly:

By bringing Symbiont’s Assembly and smart contracts together with SWIFT’s extensive network, we’re able to automatically harmonise data from multiple sources of a corporate action event. This can lead to significant efficiencies. Corporate action data from SWIFT messages is translated by the SWIFT Translator and uploaded in Symbiont’s blockchain. Their smart contract technology can then compare information shared between participants and flag discrepancies, contradictions or inconsistencies across custodians.

SWIFT went on to say that this solution is “currently in development with a pilot group of participants that are set to test it and provide feedback in September.”

Image Credit

Featured Image via Pixabay



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