The Prague Stock Exchange is implementing distributed ledger technology in the settlement of securities under the EU's DLT pilot regime.
The DLT pilot regime has been in place in the EU since 23 March 2023 and is intended as a temporary regulatory sandbox to facilitate the establishment of new types of market infrastructures, including DLT settlement systems.
The Central Securities Depository in Prague (CSD Prague) is the first institution worldwide to be granted authorisation under the regime.
Christoph Boschan, CEO of the Vienna Stock Exchange, comments: "DLT is often associated with blockchain and cryptocurrencies, but it also presents a valuable opportunity for us as an infrastructure service provider to enhance efficiency and transparency in securities settlement. We are proud to work on pioneering technological advancements within the capital market."
The consensus mechanism at the heart of the ledger synchsonises all participants of a transacctions and enables the management of a securities account and subsequently the transfer of shares or bonds to this account as part of an initial subscription, a capital increase or a transfer from another account.
Settlement via DLT has the potential to simplify the process of booking securities, reducing the administrative burden for both issuers and security holders, says Boschan.
Financial service providers can become a node in the DLT system and thus open DLT accounts for their customers and record transfers in their systems within their customer applications, creating added value for companies with employee participation programmes, fintechs and crowdfunding platforms. For SMEs, the subscription of bonds or shares without additional intermediaries offers an alternative financing option.
It will also be possible for private investors to open an account with the CSD using Bank ID and access it via a web or mobile application.
Petr Koblic, member of the Board of the Vienna Stock Exchange and CEO of the Prague Stock Exchange, comments: "During the implementation of the project, we benefited from two key advantages - integrated post-trading in the form of CSD Prague, which gives us a perfect overview of all the processes associated with the registration and settlement, and our expert IT team with 20 years of experience in securities business. Thanks to this we were able to develop the system in a very short time."