Digital Asset and IntellectEU recently published an e-book that highlights how distributed ledger technology and DAML improves operational efficiency and lowers costs in capital markets.
Holding chain bottlenecks create a lack of transparency that widens data silos and makes investor communication nearly impossible. The proposed solutions address the pain points many capital market participants encounter. These issues require a distributed ledger where transactions and agreements are stored.
The ledger would maintain all the information along the holding chain (i.e. intermediary parties, investor profiles, KYC process information, nominee accounts, etc.) to create a more operationally efficient and risk-free environment for transactions.
A distributed ledger for the entire holding chain would permit the development of new settlement solutions, like simultaneous settlement and committed settlement, bringing new levels of efficiency to the market while lowering risk. It would also enable a single place for progressing corporate actions, decreasing the cost and operational risk as the entitlement calculation and asset movements can be performed through similar mechanisms as the simultaneous settlement (avoiding each intermediary along the holding chain that duplicates corporate action processing).
This solution would require a clear identification of actors involved in the holding chain, beyond the account structure. This is only possible if a universal unique identity is created for each investor. The unique identifier in combination with the KYC DLT-based solution would permit more fluid access to markets and investments while mitigating risk contagion in the investment cycle.
With DAML smart 5. contracts, data along the holding chain ledger would only be viewed by authorized actors. It also means that privacy would be managed with clearly defined rights and permissions. For example, a subcustodian would not have access to ultimate beneficial ownership information, while an issuer should be able to know who the ultimate beneficial owners are.
Through distributed ledger technology and DAML smart contracts, financial institutions are entering an era of digital innovation that will connect global economies and provide a wealth of opportunities for market expansion.