VIDEO | Tokenisation and Distributed Ledger Technology (DLT) could soon redefine liquidity management in financial markets, according to experts during the session “Intraday liquidity management, part 1: The sell-side themes” at PostTrade360°. Through tokenisation, financial institutions could access liquidity in real time, rather than waiting the typical two-day (T+2) settlement period. “If we do tokenise, does tokenisation help us in some way around the liquidity area?” asked moderator Olaf Ransome, sparking a discussion on whether digital assets might offer solutions that traditional settlement cycles cannot.
The idea behind tokenisation is that institutions could gain intraday liquidity, enabling cash and collateral to be accessed when needed. This capability would prove especially critical in crisis scenarios, where institutions need to act swiftly to defend their positions. “Banks fail slowly and then very, very quickly,” Ross Dilworth noted, emphasising that institutions must have robust processes in place to manage risks in real time.
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The discussion also addressed how tokenisation could enable continuous, 24/7 market operations. Presently, many financial market infrastructures operate for only 10 to 12 hours a day, limiting access to funds outside of those hours. With tokenised assets, institutions could utilise their liquidity “24 hours a day,” as Brian Nolan explained, “because market infrastructures are not open…being able to utilise money or securities that you own that’s on your balance sheet 24 hours a day is very useful.”
However, some panelists questioned whether tokenisation would replace traditional finance entirely or coexist with it over time. Drawing on the experience of the 1980s financial “big bang,” Dilworth reflected that while there may be gradual adoption, it’s likely to happen over a prolonged period. “It will happen,” he said, “but you’d have to maintain both sets of capabilities…and hope that we get enough benefit from the new ones.” The transition, they suggested, could take five to ten years, with digital assets evolving gradually rather than experiencing an abrupt “big bang” replacement.
Intraday swaps
From a regulatory perspective, there is no immediate directive on intraday FX swaps, though some industry professionals advocate for such capabilities. Nolan described his efforts to engage with regulators, including the Federal Reserve, ECB, and the UK’s Prudential Regulation Authority (PRA), stating, “An intraday transaction is the same as any other transaction,” with the PRA not requiring specific policy changes for intraday execution. However, he acknowledged that while intraday transactions could benefit the financial system, they remain a lower regulatory priority.
Panellists:
Ross Dilworth, Consultant, RDX Strategy
Nick Jepson, Founder, Liquidity Consultants
Nicolas Nadeau, Senior Manager – Intraday Liquidity, National Bank of Canada
Brian Nolan, co-founder and CEO, Finteum
Moderator:
Olaf Ransome, Director, 3C Advisory
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