CSOP Asset Management completes blockchain-based OTC trade processing prototype

Source: Stacs

CSOP Asset Management Pte. Ltd. (‘CSOP’) and leading Singapore FinTech firm Hashstacs Pte Ltd (‘STACS’) today announced the completion of their Over-the-Counter (‘OTC’) Derivatives Trade Processing prototype, built by STACS on its Distributed Ledger Technology (‘DLT’)-based platform, Vetta.

Set in the context of the Asset and Wealth Management industry, the teams collaborated closely over the course of two months to build a blockchain-powered platform that allows for automated concurrent processing and real-time, perpetual reconciliation of OTC derivatives trades. The adoption of DLT and smart contracts in this collaboration aims to enable new market opportunities and operating models, eliminating long-standing inefficiencies well-recognised in the industry and improving risk management.

This is part of the long-term collaboration between STACS and CSOP to deploy a live solution for efficient OTC trade processing across different asset classes. The platform aims to eliminate and streamline bespoke trade matching parameters and resolve trade exceptions in real-time. The collaboration is supported by the Investment Management Association of Singapore (IMAS), the national representative body that spearheads the development of the fund industry in Singapore.

The platform was successfully delivered over sprints within two months, where trades were captured on the STACS blockchain immutably to provide trade participants with a single source of truth. Smart contracts were also deployed to automate and streamline the matching of trade parameters between CSOP and its counterparties.
Further enhancements of the platform in the pipeline include handling more sophisticated trade exception workflows and enabling the seamless resolution of trade breaks. Given that the OTC trades are highly bespoke and unstandardised, the collaboration would also see the incorporation of machine learning algorithms and optical character recognition technology to facilitate automatic data ingestion and transformation of unstandardised and unstructured trade parameters. Visibility of incoming trades will also be provided to both parties, with each transaction record being stored in an audit log, thus increasing transparency and auditability of data.

Future phases would move beyond trade matching to also facilitate the seamless settlement of trades. Ultimately, STACS and CSOP aim to push the industry frontier on OTC trade processing, by incorporating a wider ecosystem of market participants on this industry-wide platform interoperability with existing systems, to alleviate the financial industry from the extensive operational burden in times of trade volatility and to allow the industry to collectively benefit from the adoption of new technology to solve key challenges in trades processing and reap new strategic business opportunities.

Benjamin Soh, Managing Director at STACS, said: “We are thrilled to be part of this collaboration with CSOP Asset Management to deliver a cutting-edge live functional platform for efficient OTC Derivatives Trade Processing via distributed ledger technology. The solution enables efficiencies, risk management, servicing capacity, and an overall increase in profit for all market participants, while ensuring cross-platform interoperability and adherence to international standards of information security. This is definitely a meaningful collaboration that can create vast value and opportunities for the asset management industry and capital markets as a whole.”

David Ng, Deputy CEO at CSOP Singapore, said: “Partnering with STACS on this platform will allow CSOP to address the huge fragmentation across the entire industry, where different banks and brokers have developed their own set of varying practices along the entire trade matching and settlement process. With STACS, we hope to reduce these cumbersome and risky processes whilst achieving data transparency and security. In addition, we will be able to collaborate with our partners to build dynamic ecosystems, better operational intelligence, analytics, and audit readiness. This would enable asset managers to channel their efforts towards truly high value-adding activities instead of manual workload, as well as to equip and familiarise themselves with new technologies for a more digital future.”