BMO Capital Markets has successfully launched a pilot fixed income issuance transaction, mirrored on a blockchain platform alongside pension fund investor Ontario Teachers’ Pension Plan.
The transaction included Bank of Montreal as the issuer and Ontario Teachers as the buyer of a CDN$250MM 1-year floating rate Deposit Note, making it the first Canadian dollar fixed income issuance demonstrating the viability of blockchain platforms.
The pilot transaction – booked as a traditional Canadian Depository for Securities (CDS) issuance and successfully paralleled through the blockchain – was conducted to demonstrate how smart contracts and blockchain could be used for fixed income markets.
BMO Capital Markets designed and built a blockchain issuance system using open source blockchain infrastructure with the goal of testing a next generation settlement system. The prototype allows the security issuer and buyer to view the transaction on the blockchain and verify the accuracy of the term sheet information and payment amounts until maturity of the fixed income security. The technology is intended to enable cost reduction in several areas including compliance, financial reporting, security clearing and settlement of cash transactions.
“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities,” said Kelsey Gunderson, head of global trading, BMO Capital Markets. “We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients.”
Building on the successful launch of the prototype, BMO Capital Markets will look to continue to partner with clients and other institutions in the evolution of blockchain as an open settlement system.