Distributed ledger technology should enable instant settlement – so wouldn’t it make clearing unnecessary? A panel session at the ongoing clearing expert conference WFEClear in Seoul had a different picture to give. Many of the capabilities of DLT could well fit the fundamental risk-mitigation role of CCP clearinghouses like a glove.
Our coverage of WFEClear 2025 is gathered here.
“CCPs will be a little bit different and will have to adapt, but it is not that all of a sudden they will be gone.”
Belgian supervisory authority represenative (and PostTrade 360° columnist, of course) Randy Priem started by pointing to values of clearing which will not go away with increasing use of DLT: how CCPs also provide the advantage of netting, and how they manage variation margin to safeguard the value of derivatives position against market swings.
In a Wednesday session labelled “Predicting The Future CCP: DLT, Atomic Settlement, Disintermediation, and Auto-Liquidation”, Randy shared the stage with fellow panellists …
Julie Schoening, Global Head of Risk and Compliance, Graviton Research Capital, and
Massimo Morini, Professor of Blockchain & Cryptocurrencies, USI Lugano, in discussion led by Angelina Kwan, Senior Advisor, IMC Asia Pacific.
Randy’s more formal title is Markets & Post-Trading Unit Coordinator, with the Belgian Financial Services & Markets Authority (FSMA).
The reason we have problems getting old and new infrastructures to speak is that they come from such different places, but in the future it will not need to be so, suggested Massimo Morini.
Angelina Kwan agreed (asked for her own view by Julie Schoening despite her moderator role), foreseeing that those DLT-based marketplace innovators who survive the current era will be regulated into domains more similar to the traditional securities landscape.
“And you are now seeing them being mimicked by [traditional players such as] Deutsche Börse and State Street … ”
The strict rule setting that is possible on DLT platforms could serve efficiency well, also in the traditional finance world. Auto-liquidation of under-collateralised positions could be a useful capability.
This said, Julie Schoening emphasised that a lot of the functional progress associated with DLT, such as radically accelerated settlement, could be supported just as well by non-DLT technologies. Today’s standard settlement cycles at T+1 or T+2 are not limited by technology, she argued, but are “entirely human and cultural”.
