the Future of Securities Trading Powered by blockchain
The Canadian Securities Exchange ("CSE") is once again bringing innovation to Canadian capital markets. The CSE is set to launch a groundbreaking new blockchain-powered platform that will enable securities to be traded, cleared and settled in real-time.
In keeping with the CSE's core philosophy of providing streamlined solutions to capital markets, this new platform is a natural fit with a primary use case of blockchain-based technology: improving the efficiency of authenticating transactions.
Among the benefits this new platform can deliver to market participants:
Reduction of risk for the initial investors in STOs and for investors purchasing tokens in the secondary market by formalizing the disclosure environment. Token issuers will be required to adhere to the same Exchange requirements as conventional, non-tokenized issuers in order to achieve and maintain a listing on the CSE;
Reduction of risk for investment dealers and their clients by ensuring that trades clear and settle immediately;
Substantial cost savings achieved by eliminating the need for investment dealers to post initial and mark-to-market capital with a clearing house pending the settlement of trades;
Cost savings and error reductions associated with processing corporate actions (such as splits, consolidations, and dividend payments);
"Our new platform delivers on blockchain's promise to disrupt conventional transaction and record-keeping mechanisms, thereby providing tangible benefits for market stakeholders. We believe it represents a tremendous opportunity for stakeholders in the Canadian marketplace."
Richard Carleton, CEO, Canadian Securities Exchange
Unlike blockchain-based cryptocurrencies and ICOs, the STOs will be subject to full regulation by applicable securities commissions. As with traditional equity and debt offerings, in order to proceed with an STO, an issuer seeking to raise capital with an STO must meet the requirements of both provincial regulators as well as the CSE.
With many organizations around the world exploring and working to bring distributed ledger technology into financial services and capital markets, the CSE's experience in deploying a blockchain-powered clearing and settlement platform will contribute to as well as inform Canada's advancement in this dynamic space.
Over the coming weeks and months there will be a number of important developments and announcements that will further clarify details on how and when this new platform will formally go live.
In the interim, be sure to register for updates on the roll-out of the CSE's new blockchain-powered platform or for more information on how to participate in an STO.
Frequently Asked Questions
Question 1: What is a Security Token Offering (STO)?
A Security Token Offering (“STO”) is a digitized form of security issuance that uses encrypted tokens stored on a blockchain.
Question 2: When will the new blockchain platform launch?
More information about the exact launch date of the new platform will be made available as the CSE moves through the regulatory process for the establishment of a new clearing house.
Question 3: What blockchain protocol will be used?
The new platform will be based on the Ethereum protocol. Additional details will be made available as technical and regulatory requirements become clearer.
Question 4: How does a blockchain-based platform benefit issuers?
Using a blockchain-powered architecture opens up a robust spectrum of opportunities for issuers to raise capital. Some of the possible use cases for issuers include the ability to create new rights and privileges for investors (e.g.royalty streams), and contingent events.
Question 5: How does this platform benefit dealers?
Leveraging the power of distributed ledger technology, dealers can benefit from real-time clearing and settlement, elimination of errors in securities processing and ultimately a dramatic lowering of costs.
Question 6: How does this benefit investors?
Investors can directly benefit from increasingly automated back-office workflows with faster and more accurate services including: dividend allocation, splits/consolidations and communications to shareholders.