INTERVIEW | A keynote session at PostTrade 360’s September conference invited Clearstream’s Jens Hachmeister and Google Cloud’s Ashish Majmundar to discuss their firms’ strategic partnership. This follow-up interview dives deeper with audience questions about what post-trade transformation looks like in practice.
Cloud adoption in post-trade is accelerating due to the benefits of scalability, cost efficiency, and enhanced data analytics capabilities. During our September conference session, we couldn’t get to all the audience questions. We followed up with Jens Hachmeister, managing director, head of Issuer Services & New Digital Markets at Clearstream, and Ashish Majmundar, global head of FSI Practice at Google Cloud, for their practical insights into digitising the post-trade value chain with a cloud-native digital securities infrastructure, called D7.
What is the vision for D7?
We unpacked this question into three parts: Is Clearstream migrating infrastructure to the cloud, or building a new tokenised operating model for digital assets? How does it coexist with the traditional landscape? What will the financial market infrastructure look like in 3-5 years?
Think of a music store in the streaming era. There are buyers, sellers and makers of music, and the store that enables choice between music that’s streamed, on CDs, tapes and records. Hachmeister describes Clearstream in the cloud as a hybrid infrastructure that provides users of securities services markets with a choice between using new technologies to mirror the traditional securities lifecycle or a security token on a private permissioned DLT solution.
“Both the traditional digital element and the smart contract-based element can be seamlessly exchanged,” he explains. Users’ securities and the lifecycle exist in multiple forms: as traditional automated securities, as tokenised securities which model the securities lifecycle from issuance to redemption using smart contracts and DLT for settlement, and traditional account or wallet account holdings, enabling them to connect to the D7 DLT infrastructure. Just as music lovers can stream a song or buy the vinyl – even switching between formats – D7 lets users choose between traditional securities and tokenised assets, moving seamlessly between them.
What problem does this approach try to solve?
D7 is serving changing market demands, enabled by new technologies and emerging regulations. “We’re moving to a world of instant securities services where we enable instant issuance, direct distribution, T+1 and instant settlement, and where we mix and match instant securities, traditional and new types of cash,” says Hachmeister.
The digital music metaphor extends to the relationships too: there’s more direct interaction between the issuers, or record-makers, and the investors, or record buyers. The time between product design, issuance and distribution is shrinking as the world of instant securities services enables market participants to on and off-ramp in a digital shape and form.
Which processes are affected?
Clearstream’s D7 digital CSD aims to help customers get closer to end investors by serving the next generation of market demand and market requirements. The digital CSD provides customers – banks, issuers, central banks, clearinghouses and European sovereigns – access to more services and data-rich products depending on their needs.
This includes enabling issuers to deliver tokenised collateral to clearinghouses, trading venues to create trading pairs of tokenised securities with stablecoins and investors to connect their custodial or non-custodial wallets to Clearstream’s settlement infrastructure.
Clearstream is working towards this iteratively. “The next step is to upgrade our D7 DLT platform to a fully scalable infrastructure, including elements such as the wallet, settlement on-chain, connectivity to a digital euro and the tokenisation of the 21 trillion of real-world assets held in Clearstream.”
The intraday liquidity use case
D7 DLT will tokenise collateral to solve a treasury pain-point, allowing for instant issuance, distribution and direct settlement of an issued debt product, which will give financial institutions immediate access to liquidity.
There are two elements to this, explains Hachmeister. First, it provides treasurers and corporate issuers with a pre-issuance platform, giving them same-day access to liquidity for their commercial paper programme. “Instant issuance throughout the platform should give them funds in their account on the same day.”
Second, Clearstream is exploring connecting its digital CSD with the HQLA x DLT platform, enabling customers to pledge collateral in clearinghouses or facilitate collateral swaps with other market participants using tokens. “Factually and legally, we have swapped the right to the collateral without swapping the collateral, which means you get much more granular when it comes to intraday collateral management,” says Hachmeister. “The more granular you can manage your collateral today, the more you avoid overcollateralisation, which should relieve your balance sheet dramatically.”
How do FMIs navigate compliance and data sovereignty in the cloud?
Clearstream uses Google as its main partner as well as Microsoft for choice and flexibility. Hachmeister explains: “We engage with their European subsidiaries as part of a European-based infrastructure which we operate, and the need to comply with European regulations, including GDPR and DORA.”
However, he cautions that post-trade service providers building infrastructure and applications on the cloud should take certain steps if they want to move from one underlying rail to another, so they’re not tied too deeply to the infrastructure tools and elements of one provider.
On data flows, the concern centres on data landing in a differing GDPR jurisdiction from where it started. “It’s about trying to ensure that we don’t violate any IP rights of the data which we do not originally own or produce,” says Hachmeister.
There’s data Clearstream creates originally, and data it uses and must navigate from an IP point of view. The European Commission’s regulatory framework stipulates ring-fencing of data operated and stored in European clouds, and respecting IP. “If you market products and you do not respect data as an ingredient, you’ve built your solution on sand.”
What are the dos and don’ts for the post-trade transformation journey to the cloud?
According to Hachmeister, the first, most important consideration is ensuring a strong use case for market participants to create adoption, “otherwise you’re just building technology”. The value of a new solution is measured in three ways: to create market efficiency, to improve market resilience substantially or to enable market growth.
“This is what we see in terms of adoption with D7. The use case we offer the market is intraday issuance to an asset class and a fully automated trade lifecycle, all via an API.”
Business cases that drive technological decisions are critical for all parties involved, states Majmundar. “For instance, when a company aims to tokenise securities, success hinges on securing the consensus and commitment of all participants in the value chain. Tokenisation requires market players to modify their existing systems and operations. The benefits of this transformation – especially enhanced transparency, governance, and atomic settlement – must be clearly articulated to incentivise stakeholders to move beyond the status quo.”
This foundational business understanding then informs key technical choices, such as whether centralised and decentralised ledger systems should run in parallel, which system will be designated the system of record, and what contingency protocols are needed for disruptions. “Clarity on the functional allocation between these systems and how they communicate is critical for a successful post-trade transformation,” adds Majmundar.
The second consideration is challenging the assumption that transformation relies on one technology. “It’s like climbing a mountain – you rarely take the steep route, but you either zigzag or go around using different technologies at their current stage, explains Hachmeister. “Cloud, for instance, has evolved as a technology, DLT is somewhere in the middle, API has been around 20 or 30 years, and AI is an “old” technology but fresh in GenAI and agentic AI forms.”
A solution should assess the combination of technologies at their current stages instead of a one-size-fits-all approach.
The third consideration is doing things iteratively. “You can’t wait 10 years for the new technology and infrastructure to be in place. It’s about developing building blocks, embedding them into existing technology and going iteration by iteration,” says Hachmeister. “We had two versions of our digitisation engine – the first built on a hybrid infrastructure with smart contracts and the second now built on multiparty workflow and micro services because it’s much more scalable. You learn, you iterate, and you redeploy.”
In this approach, participants define certain elements to transform and embed into the rest of the infrastructure. “80% is integration with legacy and 20% is building the new element,” states Hachmeister. New solutions need to be built into existing legacy. For example, in the tokenisation of real-world assets, there’s a balance to be struck between traditional accounts and wallets. “They always need to be in synch. Therefore, you always need to have the back reference not just into the old world but into the existing technology. So when you do a build, you need to build the new and adapt the old.”
