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DLT in Action: Why Leaders Made the Switch

Join the repo transformation.

Initiatives for Digitalisation of Capital Markets Processes

Early Adaptor Decision Points

The Impact and Benefit of Innovation

Regulation and Tokenisation

Implementing Smart Contract Workflows

Workflow Benefit Use Case

Transformation of Capital Markets

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Video Transcript

Elizabeth

Hello, and thank you for attending today's webinar, DLT In Action, Why Leaders Made the Switch. Before we begin, we'd like to cover a few housekeeping items. The video window is movable and resizable, so feel free to increase or decrease to your preference.

Please submit questions via the Q and A box. We welcome questions for our presenters throughout the entire session, and we'll try to answer your inquiries during the webcast, but if we run out of time, your questions will be answered via email.

Now, we'll turn it over to Horacio Barakat.

Horacio Barakat

Thank you, Elizabeth. Good morning and good afternoon, everybody. Thanks for joining us in this webinar where we will discuss the progress of digitisation of capital market infrastructure, and in particular, the utilisation of smart contract technology and tokenisation of assets among other innovations.

And also, want to apologise for a late start. We ran into some technical issues, so hopefully that shouldn't take a lot of time out of our discussions.

Let's start with some introductions first. My name is Horacio Barakat from Broadridge. I run our digital innovation practice for capital markets. As part of those responsibilities, I run Distributed Ledger platform that went live exactly one year ago.

It's a great success, and something that we will talk about today during the course of this webinar. Now, Kelly, if you don't mind providing a little background, I'll start with you.

Kelly Mathieson

Sure. Very nice to be spending time with all of you today. Thanks for having me. Kelly Mathieson. I Lead the client experience team at Digital Asset. We are the creators of Demo the software programming language that's underpinning Broadridge's solution.

Very happy to be chatting about the key themes that we're seeing for folks that are driving the change in this industry.

Horacio Barakat

Thank you, Kelly. Tom?

Tom Sullivan

Hi, good morning. I'm Tom Sullivan. I'm at Societe Generale where I manage the cross asset back office, which includes our securities operations. I also have taken the lead on a number of technology and innovation solutions.

And one of the key ones that we've been working on over the past few years has been blockchain, a distributed ledger technology transformation. And so I'm really happy to be here today to have this discussion.

Thank you.

Horacio Barakat

Okay, so let's get right to it. Before we start, as Elizabeth said, let's make this as interactive as possible. So feel free to log in questions in the QA chat box and I'll try to weave them into the flow of the discussion, the best I can.

So over the last year or so, we have seen significant uptake in activity and several platforms DLT in particular have become part of current market infrastructure and reached institutional scale volumes.

Right? As we see the evolution of DLT and it in capital markets, what are you seeing clients do or steers towards and particularly refers to market infrastructure companies.

Kelly, start with you.

Kelly Mathieson

Sure. Yeah. A few things. It's a great question, because I feel like we're in an industry where the pace of change that's occurring, particularly going from the philosophical to the practical is so rapid that any number of months can create new themes and changes in market conditions that are affecting the uses of these technologies.

But there's a couple of things that I would say are current probably reflecting a little bit of the market conditions in terms of the solutions in the space repo and more broadly capital markets.

The first is the technology, the multi- party workflows that are being evaluated for how they can be improved with these types of technologies, not dissimilar from what you've created with DLR is a focus on efficiency, on risk reduction, on processes that are in place across multiple different parties and systems where the history of those systems and the parties that use them and the workflows across them might not have been one decision at one time, but has actually growed in bits and pieces over time.

And so therefore the current system is not as efficient. It's not as clear in understanding, has a high degree of risk in terms of handoffs. So really big focus on process and in particular looking at workflows that would not previously been possible or practical to look at because it would've meant the sharing of data across boundaries or systems or parties where the data privacy and principles could not be preserved.

I think the other focus or key theme I would say is the focalisation on the tokenisation or digitisation. If that's a word of increasingly more asset types I suspect this is frankly a issue a little bit of what you're seeing, where it starts in a traditional place, such as repo, but what becomes possible with these technologies is to contemplate new structures, new asset types, and you see that growth going off in the direction of new ways to generate revenue with new types of assets that could not have been supported on prior technology.

I think the one other thing that I'll say, and we can get into a little bit more of this later is there's also a bit of an approach difference. So not simply what I've touched on here in terms of themes and how things are being created and what's being created, but also the process itself.

I think we've seen the industry, particularly in the capital markets and financial services sector shift from mega builds that are meant to take out a whole system and introduce a new solution.

But frankly much like what you've done with DLR, which is these incremental builds of starting with key capstone relationships and core components of an overall solution, an overall set of assets, but these incremental bills that are allowing not simply the new service or new product to be created, but the business case to be proven out.

And for all those that are interacting in that multiparty workflow to be able to learn from the technology and really learn where, the technology can take them.

So those are some of the market trends that we're seeing.

Horacio Barakat

Thank you, Kelly. And from a practitioner's perspective Tom, SocGen is highly innovative institutions that we've seen over the last several years.

So what type of initiatives are you implementing within your organisation and what vision do you have for digitisation of various capital markets processes?

Tom Sullivan

Yeah, it's a great question Horacio. You, and firstly, I would, I would echo a lot of the things that Kelly had said about where things stand, but in fact it's really interesting that last night I was in a meeting with our COO and the head of our business on the market side and the head of operations.

And we were really getting together to go through all of the initiatives that we have, both that were either, I would say knee deep in neck, deep in, or have a toe in the water.

And there, there are a number of different things that we are we're working on. And I think that it touches on some of the things that Kelly noted, which is incremental things that you can make a change for where you can save money, improve your client experience, create efficiency in your day to day processes.

But then there's also some of the transformative things. And our firm is involved we have a division called SG FORGE where we are doing native tokens securities issuances natively on blockchain.

And in fact on public blockchain, we've done some things with experimentation and real live deployments, but experimentation in Europe with central bank, digital currencies.

So there are a few key areas that we're working on. And in fact, I think that one of the things that we came to the realisation is that we probably don't have enough resources working on this right now compared to the things that we really want to we really want to do, and we really want to push forward on.

So I think that was for me being involved in this for the past several years was really an exciting conversation to say," Okay, yeah, we're doing these things." And What we are seeing though is there's both from a provider standpoint there's Broadridge who's a trusted partner for us and for many firms on the street.

There are also startups that are involved. And then there are also I would say some of the traditional clearing organisations like DTCC, that's, that's moving in these directions.

So I think that we have a few key areas of, I would say the nuts and bolts of clearing, whether it be repo on, on the equity side, there are some initiatives on I would say KYC and things like things of that nature.

And then there's the more expansive things of issuing securities on blockchain, whether it be public or private. As Kelly said, one of the really exciting things is the new products, new solutions that we could envision coming out of the steps that we're taking today.

Horacio Barakat

Yeah. As an early adopter, I know it would be interesting to hear from you, Tom, what are the decision points to trigger that made you jump onto these various platforms and obviously with, with the objective of benefiting SocGen and your clients, and then within a question from the audience, how do you, how do you compare and balance the future that you envision with the existing process, with the current process and the benefits that you, that you can achieve?

Tom Sullivan

Yeah. So I'll try to put those two things together. I think that the firstly among the decision points that we have are when can we see when can we see benefit and what benefit so would that be an improvement to process a cost savings, and are we achieving those things in the near term, right away as we are with the Broadridge distributed ledger project with repo, or is it more of a long term thing that we engage in and we learn.

So, I would say cost efficiency and when, and then in terms of the other decisions that come into play, there's also, I would say the credibility of all the partners that you're choosing and the companies that you're working with.

So obviously we work closely with Broadridge and Broadridge has an extensive track record of deploying systems and solutions, but even from a startup standpoint, I think that we've been involved with, with Paxos and Paxos has taken the approach of being a going the registered route, trying to become a registered clearing agency with the FCC.

They're already register trust with the state of New York. So there's a level of credibility of, and if you look at the business plan and the roadmap, both on the broader side, tax side and there are others of what's going to be achieved in the near term and the long term, as I said, and then one of the key things is we focus on here is client experience.

So is this going to benefit our clients and how, and I think that from a specifically with this, with this repo platform, we started our doing we are starting out doing intercompany transactions, but there is a knock on impact of that actually benefits our clients, because we're able to consolidate some of the settlement locations that we use at bank of New York.

We're creating a more seamless street facing or client facing activity with what we actually are doing in the Bank of New York environment.

So, and that's one of the things I would say it's critical. We being more efficient? Are we saving money? Are we improving our client experience? Those are the, those are the key pillars.

And the to answer the question from the audience, if I think I understand it correctly, is the integration and folding it in. And that's an awesome question. And that's specifically what made this DLT solution compelling in that it has the interoperability with our existing systems.

And now in our case, we're a Broadridge user. So we use some of the Broadridge platforms. But we know that it also is Broadridge agnostic so that there are it would integrate with other platforms internal systems that are not Broadridge applications, but also how we interact with our clearing bank, with our payment systems, things like that, where it's the concept of what I call the On- Ramps and all- frames to the digitisation and tokenisation.

So I think that those are really critical in it would be if you have this pie in the sky vision of doing something great and changing the world can you really achieve that?

And so it's taking things that you really think that you can achieve and making them happen. So I think it's a great question. Thank you.

Horacio Barakat

Yeah. Thank you, Tom. Continuing the overall benefits of the DLT platforms. Kelly, you mentioned Tokenisation. I know that is something that you thought very deeply about, and you continue to make significant innovation in this area.

With your view of multiple clients, right across multiple industries, particularly capital markets, but different buckets between capital markets, how do you see those innovations impacting or benefiting clients from operational efficiencies to liquidity, to collateral velocity capital velocity?

Kelly Mathieson

Sure. I might start with some very specific comments that are hopefully relevant to those listening in the rebound collateral space, but then I'll come, come out of it or come successively up layers.

So bear with me for, for a second as I go through some of this, because it's such an interesting question. I think specifically in the collateral management, in the repo space or in, I might broaden that out a little bit more to say the security is financing space, where we see both buy side and sell side attempting to get better use of the securities they have, or the positions that they're attending to cover and how to be able to do that more efficiently.

When you move to using a language such as Daml or smart contract language, to be able to define assets and the rights and obligations over those assets, you can begin to advance beyond the current ways of doing collateral management in ways that current system limitations would really preclude or prevent you from being able to do what by that is when you're defining an asset, the tokenisation of it Horacio to use the reference both you and I've made.

But when you're defining an asset, those of us coming from say a security services type of background, would look at that and think of that as the reference data, the static, sometimes dynamic data, that's used to define a particular asset type and be able to have information feed in from various pricing and reference data vendors.

But when you shift to a digitiser or a tokenised world of expressing an asset, the definition of what you can put on that asset becomes exponential if not infinite to some degree, but exponential in that, the way an asset is defined can go well beyond the particular reference data.

So specific to the area that we're talking about today, that means that in this space, the eligibility criteria that exists between two counterparts and maybe you and I have multiple eligibility criteria for different legal entities that we're using or different types of risk, we want to have to each other, but the eligibility criteria can actually be embedded on the asset, the rules for substitution and recall, and how to meet RQVS in this space can be embedded on the asset.

So think about the assets as being tagged, if you will, not simply with reference data, but when you're setting them up digitally, that asset itself can also be set up with the terms and conditions that would let that asset be eligible for an obligation I might have to you or an obligation I might have to Tom.

Once you can embrace that idea of dividing those assets and really leveraging the fact that they're digitised or tokenised to have a much more comprehensive and expanded definition of what that asset is.

Well, then it's the asset itself. That's going to let whether it's eligible for a particular obligation, whether it's been part of a recall transaction and needs to be substituted.

I don't mean to personify assets, but to some degree they become a bit of that. There's actors in the workflow because we've given and those conditions that criteria embedded it on the assets itself and brought life to it.

If you will, by virtue of automated rules and responsibilities that we've said about that eligibility. So the concept of collateral management shifts from being something that's done after the fact only on assets that are moved to a collateral account where it can be done much more real time, more actively on assets that are moving through the network that are immobilised at different locations, and can make themselves available for obligations or to be recalled from obligations in a more real time oriented way.

Now, if you do that, if you're talking about a process for eligibility as an allocation, automated RQVS substitution to recalls, even to some degree automated optimisation, this is leading to real time liquidity management to get to one of the specific points you've asked about the ability for organisations that are doing that securities financing, whether on the buy side, or say as an agent lend, whether I on the sell side or say as an agent lender on the buy side where balance sheet use is involved in those decisions, that's becoming more real time, more in the moment and therefore more efficient and more cost effective liquidity management is exactly one of the points that Tom was making on.

Why would you start with intra day? I think those of us who come from the industry think of intra day as about as exciting as mud, but the reality is in this, using these technologies and the way, say, for example, Broadridge has put together a solution with DLR.

It becomes the thing, it is now core to how decisions are being made, because you have that ability to shift, use, evaluate, identify the balance, the assets and thereby the balance sheet use on those assets on a more active reflecting, and in the moment in a day as it's occurred and more global, and that ultimately is going to lead to come further out of it to lower overall operating costs, which I think ties directly to the question from the person in the audience.

How do you compare the current state to the future state while you compare it with lower overall operating costs, more efficient and ideally lower or more intentional balance sheet use that isn't all building up to occurring at the end of the day.

And you do that with a single virtual system of record that begins to ultimately inform a much broader, more comprehensive set of transaction activity.

I'll plant the thought and I'll come to it in the later question. But then the ultimate out of that is this creation of a network. It starts with the assets itself and the workflow around it, and a virtual system of record, but you're getting a network itself that's being created that goes beyond any one solution or one asset type, but the ability for all, for you and I, and NR assets to interact on multiple different types of services, because now we're part of a tokenised and a smart, contracted DLT supported network.

Horacio Barakat

Thank you very much, Kelly. I think we're going to talk a little bit more about the benefits and use cases, but I like that high level view, high level thinking that you provided now going onto the other flip side.

Let's talk about that a little bit on the legal and regulatory side. Particularly relates to smart contracts and tokenisation. I know, obviously this is front and center for all institutions in capital markets.

And I know Tom, you've been through this process. I know on all the platforms that you joined both internally and external, but how do you start thinking through that process?

How do you pave your way for, for, for implementation making sure that you, that you check the boxes around legal and regulatory and compliance.

Tom Sullivan

Yeah. I think that there are a couple of things that come into play and it depends on the use case. So is it for within the four walls at four walls of your shop, is it getting your legal team, comfortable with the concept of what a tokenised asset is and what it can do and what it can't do.

And as Kelly was describing, before I think that the possibility is for it to do a lot and a lot more than that we're doing at the moment, but at the end of the day it's the difference between a security that you have, that's it effectively a line on a DTC as opposed to calling it a token.

I think that's where you say, well, there's, there's an element of trust in how do you trust it? So now DTC is a deposit rate it's trust company. But in our case the first step is, as I mentioned, doing things in internally, we intercompany where those tokens are not leaving our four walls.

So I think that the ability to get comfortable with the token or the digital representation is representing ownership. And then you take that as the same way you take any other asset, whether it be a piece of paper or, or something at a depository.

I think that's one of the things we've been able to do is get legal teams comfortable with, with what that is and what that means. And you have to think about it a little bit further with how that the interaction with other regulations and without getting into the gory details we have had to explore some things that we when we first launched into this, we didn't consider.

So I would say as a people who, depending on the stage that you're at in your journey with this stuff, it's you'd be prepared to take some side trips because those things are going to come up that you don't expect in.

One of the things was some of the, how it's viewed from a regulatory standpoint, but I think that it's clear that this represents ownership and you can take that forward.

It makes sense. I think that there's a broader topic with respect to regulators and how regulators are viewing particularly security tokens and native security tokens.

Part of that, I think that there're different regulators have, I would say different maturities with respect to his stuff, and even those who are well advanced.

The FCC I think very knowledgeable about tokenised securities and crypto assets and things of that nature there's still, I think that the FCC is somewhat behind in maybe CFTC and other regulators.

And certainly as it does, it is in Europe where, or in Asia, in fact, where they are exploring with central bank, digital currencies, and they're actually putting that to use already. Those the things I think are, is where it's important to be part of the dialogue and have that discussion with your regulator.

And in fact, with industry groups, both System is a great example of being part of those discussions where they are doing great work advancing some of the idea that we have within the industry, as well as within forms, within vendors and things like that.

So, but suffice to say, I think that there's while we've bid some great steps in getting over some regulatory, some legal hurdles and particularly with the understanding of what these assets are and what they can be.

I think the greater challenge and the broader challenge would be on the regulatory front as we expand and move forward.

Horacio Barakat

Set up. And I don't want to put you in the spot, that with an audience question around given, given recent ACC guidance and framework right around last particular around custody, what would be the impact on the adoption of know, of various platforms that rely on digitisation of assets and smart contract?

Tom Sullivan

So, I think that I alluded to some of that stuff earlier in the sense that, and in specifically with the distributor led repo platform, and in fact, some others I think that when you take the step, we can demonstrate that security still exist.

And I'll use air quotes. You can't see me while using air quotes in the real world, meaning that they are at a depository. And then there's a digital representation on the distributed ledger that allows us to do some of the things that Kelly described from a smart contract standpoint.

But nevertheless, we can go and say, yes rest assure that at the end of the day, these assets do reside at a depository, or they reside at a bank. And then we're doing these extra activity on the ledger.

And I think that there are other use cases where that is the case I alluded to earlier, and it's similar in that regard. And I think that's something that had gotten the regulators comfortable.

When you talk about other types of digital, native assets where their securities, I think that's where it gets I think that there's a little bit more caution and that's why the FCC has put forth at least from a broker dealer standpoint, the idea that they want broker dealers to ring fence this activity, because they're concerned with some things that I think if you're talking about crypto and public blockchain, that there may be some legitimate concerns, but certainly not the same as with what's a private permission blockchain, which was what we're dealing with the broader application today.

So, which is to say that depending on the type of approach that you take and the type of assets that you're looking at, and the type of I would say, even environment that you're looking at, it makes things easier or harder.

And it's certainly easier when you can say, as I mentioned, that those securities are there, they're in a depository, they're in DTC, they're in, they're in they're on fed wire and we're able to move these do the collateral movements and representations of smart contracts in a private permission way.

That's doesn't run the risks of what people perceive with crypto.

Horacio Barakat

Yeah. I really like that distinction between the true digital native security, and then the other one, which is digital presentation of the conversation among other things, for record keeping purpose for tracking purposes, the security is still at the depository.

So you, I like the way that you frame it. Thank you. Kelly, as you talk to and your clients are no large, large market infrastructure companies, no Broadridge amongst one of them.

As a provider of smart contract language. That is live and in operation, in the production environment, what advice would you give institutions going through this process internally or externally?

Kelly Mathieson

Yeah, it's a good question. I think there are a couple things that have proven across different projects, not your own, but others, that we're seeing in the space from financial market infrastructures to market participants that are in common.

They're going to sound, to be fair, they might sound a little bit like motherhood and apple pie, like you would do it for every large project. I don't think the nature of a project becoming smart contractor driven or DLT driven, necessarily changes, good principles and good program governments or business strategy practices, but they are a little bit more acute.

And I'll touch on why first. And I think this is something important that you guys had done, which is to have, particularly if you're talking about multiparty workflows, have that market participant group, whether it's your clients, it's a regulatory authority.

It might be that you're working on something that's an internal workflow. And it's all of the different departments within an organisation that are part of that workflow, but have all of the roles that are represented in the workflow that you're talking about.

Be part of the requirements and provide early influence or early influence to the design. Because we are often talking about multiparty workflows complex in many ways, that previously wouldn't have been contemplated by, by other systems and solutions designs, which ended at the edge of a system in my system.

And then I would've had messages over to you Horacio for example, but now with your solutions, with other solutions, we're talking about one workflow. We own the data together.

We own that workflow together. It's an expression of our legal agreement with each other. The technology is not replacing that legal agreement, but it needs to have literally no daylight between it.

So the roles, the rights and obligations that we have along a transaction that often goes on for some period of time, under different market conditions, all of that needs to be captured in the requirements.

Prior projects didn't really contemplate. They would contemplate multiple parties, but not the ownership, the rights and obligations of multiple parties to act on that data as equally as if it were their own, because in this case, it is so it's early influence from those market.

Participant groups also means preparedness, and I'm sure Tom can relate to this. It's reflected in some of his comments preparedness for when that solution is going to go live and he is coming, he and his organisation are coming to that solution as an owner, not simply using something that Broadridge is providing, but actively engaging and being involved in it and is an owner of the decisions and data in that process.

So I think that engagement is probably the most paramount thing that we see. I would say closely tied to that is thinking through that entire new workflow.

Again, it takes a minute to be able to do that. Those of us from these backgrounds where we're so bound by the end of our own systems or bound by the end of a settlement day, we're no longer bounded by those when we're talking about these operating processes.

So you have to bring in the influence of balance sheet, use the influence of capital allocation, the influence of risk reporting and compliance improvements to some degree, sometimes the influence of how a regulator will oversee it, Tom.

And both, you have touched on that. So it's not that it's different from, from best practices and principles that would've existed in any project. Any of us would've been talking about whether we're using this technology or not.

It's that once you start getting into the world of using smart contract, potentially DLT underneath, as you've done, you're really taking the little, Across what previously were boundaries, whether that boundary is the settlement day, whether the boundary is an asset held at a particular location, the boundary is the number of market participants and counterparties that can be involved in it. And that requires a much, much more different approach.

And I think one of the questions from the audience was are all of these activities that are being conducted via a smart contract designed workflow and then smart contracts. So earth flow, smart contract itself is a way of defining the workflow.

It's not so much the thing, the thing is the workflow that, and the solution that's gets agreed by using that type of technology, but are the rights and obligations and decisions and to act or to not take an action.

Are they recorded on, on the ledger? Yeah, absolutely. That is the condition by which we can all be owners of that data because every action that is granted or entitled or could happen or is permission to happen.

Every action that happens has to be recorded on that. Immutable ledger, because we are all owners of that data together. It is a virtual system of record and we all own our proportion of it.

And so to have anything less than the condition of all of those actions reported on the ledger would render one of us to have an outsize or an imbalanced access to that data.

And so it's not a condition that can exist. And I think that's critical to taking that mental leap of we're now talking about really multi- party workflows and what does that mean and how do you evidence the activities that those multiple parties have taken over a transaction or a process.

Horacio Barakat

Okay. Thank you very much, Kelly. Now let's go back to know to the benefits and improvements. Let's do a, let's do a deep dive, a double click on, on that topic.

Now that we went through the high level benefits and then also their regulatory and legal processes.

You Kelly and Tom are, are, are very involved in live platforms. That are use in tokenisation smart contracts. What is your ideal use cases for, for this, for this technology.

I know that we can talk about repo. We can talk about the other sectors of the market, but what particular workflows benefits use cases do you see this technology significantly transforming on bringing significant benefits to, and whomever maybe Tom, I'll start with you.

Tom Sullivan

Yeah, yeah. So, I think that there are a few specific ones, but maybe before I tip my hand there. I would say that and using Kelly's words of being what you're being bound by currently.

And I think about in the current environment where we're bound by the roles that we have in a department, like what a trade support person does and what a settlements person does and what a liquidity monitoring person does and what a treasury person does.

And you think about all these stops along the way of a process or of a transaction. And what happens is that data goes in one direction.

It gets sent somewhere. And then it gets transformed in some way. And somebody takes that and says, I've got to do something else with it. And so you have this need for even within, within an organisation, but then if you go externally, you have this need to say, okay, well, I'm going to deliver data to somebody and I'm going to get, maybe get information back that says the trade matched or it didn't match, or, or what have, have you.

And then it goes down the line and then it, a transaction will settle at a depository. And then there's a different set of interaction and a different team of people that do that. And when you have this concept, and so I know Kelly was talking about bound by some, with technology, but I'm thinking about bound by all processes.

And in some ways that those things clearly make sense. You have segregation of duties, you have things that you need to do. With the vision and dream of a blockchain or distributed leisure environment is this single source of truth.

Again, Kelly, I think was referencing this before, but the idea that it's my data is the same data as what my counterpart is seeing.

So I don't have to worry about, is that right or wrong right away that information is we agree. That's fact and you can move on.

So I think that the ideal solutions and there are different ones. I think the idea, as I mentioned before, of having the ability to natively issue securities on the blockchain and leverage say central bank, digital currency to do that, to do that settlement, I think that there's some that's one example of saying, okay, we'll move to that environment.

And then where you can do things that you couldn't do before. By means of, it's no longer a have a stock or a bond or aa swap it's what happens all along the way in the collateral movements that happens.

So when you have those interactions, but you're not saying, okay, well, I sold stock. And then somebody else takes that stock and uses it for a security lending transaction. And somebody else takes that stock and uses it for to allocate collateral on a trip party where you can do all those things with a new product.

And I think that's the big time vision, but on a smaller scale and using the environment that we're in. And I think getting back to the, to the repo use case is that there is clearly the benefits that you can get from streamlining those, those steps along the way, and not having each discrete action taken by discrete teams.

And then what you started when the trade was input. And it resolved three months later is it's not the same thing, and you don't have that history and knowledge it's broken up in pieces and held in different systems with information held bits of information held by different people and lost and added along the way.

So I think that those are the things that we say, okay, the bigger, long term vision, what that is, and then the reality of what we can do in the existing framework.

Kelly, if you have other thoughts.

Kelly Mathieson

Yeah, no. No, no, I'm happy to, I thought those were great thoughts, but I'm happy to chime in. The only thing that I think I would add is a couple of different points.

The first is going beyond some of the, in terms of use cases that we're seeing three things going beyond some of the creation of the workflow and the asset itself, such as what we're talking about here in terms of what Broadridge has done to thinking about some of the ways that operating efficiencies or risk can be managed.

So I wouldn't normally describe optimisation in collateral management as operating efficiency or risk management function, but is it's a, it's a way of making sure that there's no waste in the system from how assets are being used in order to get maximum benefit of meeting an obligation or maximum benefit in generating some additional alpha by being lent or being used.

So I think I used to spend a lot of time on this when I was in this space, but organisations think about how to optimise. It's not simply how I feel about the asset or how I feel about the counterparty.

Yes, counterparty and credit risk does come into it, but it's also market risk, different types of assets and concentrations, and how that can change over time or even daily, or even within the day on how you feel about different market activities or news activities and economic activities that are affecting the market. So market risk is part of it, liquidity risk, the degree to which I may need or want in certain security types, however valuable they may be as cheapest to deliver or as collateral, but I may want or need on any given basis to have more of cash or us treasuries around for any particular reason, more high quality liquid assets for any reason, but then, but in settlement risk, how the degree of cost and time and risk associated settlement, how different collateral confidence factors of different collateral types, all of these come into a much more complex risk model.

And we see this playing out over a number of different use cases that it's not simply the creation of the workflow itself, or of the tokenisation of a new asset or the creation of a new asset, but then thinking about the environment from a risk and from a regulatory and a compliance and controls perspective, that's wrapped around that.

And how can some of the efficiencies by creating these immutable automated more shared data workflows come into managing the larger picture around it.

It's expanding it and thinking about how it integrates into most large financial institutions that are more complex than doing one thing. I think the other thing too is I talked about a little bit before what we're seeing in terms of use cases, this concept of network.

And I think what we're seeing now is as you go around the globe, there are different market infrastructures that have solutions that are different mega service and product providers such as Broadridge that are in this space.

But. The market participants say someone like Tom's organisation can be involved in multiple of those. And frankly, if at all had ever meant for Tom's organisation or the other clients of Broadridge is that they're going to have then multiple different ways of participating in other solutions and multiple different nodes.

I don't know. The technology's changed, but I'm not sure it's actually gotten a whole lot better for people like Tom. He says multiple different things he needs to manage now. And granted for a period of time as the industry's going, that's probably the way it's going to grow is people are trying to see which different service providers and which technologies scale and are ultimately suited for the financial services space.

But as that's starting to happen, we see this desire to create interconnected networks, global economic networks that would allow an organisation such as Tom's or the other clients of Broadridge to be able to part, have a way technologically of participating in Broadridge's network, but also the ASX network and also the Deutsche Boards network and also the HKX and the NASDAQ networks, and not to have multiple repeated many DLTs all over the place.

So we're, we're increasingly working with clients, not simply for the solution that they're on and not simply with the participants who are part of that solution now in this shared virtual workflow, but how are those solutions around financial services and around the globe collecting, connecting in an efficient way so that this, this economic network is created.

I think if we do this same webinar our year for now, what we'll probably see is now what type of solutions got created as a result of those economic networks, but that's only starting to be part of the dialogue right now.

Horacio Barakat

That's a great point. This we've seen to the one question from the audience, how do you, and I think this is probably, well for both of you maybe let's start with you Tom.

It is thinking about the interpretability. How do you, it is, obviously nobody has to cross the ball. So how do you think about interpretability given all the things that you're doing, but also not interoperability with existing, and this is my add to the question.

It is not between, between the new platforms, but actually, how do you think about interoperability with existing market infrastructure?

Tom Sullivan

Yeah, I think that the that's especially with the, with the projects that we've been as I said, neck deep in it's, that's been critical. It's how we build that.

So we have we're able to manage that seamlessly. And I think in this case in VLR platform we have, that's one of been one it's. So it interacts with the existing infrastructure say we use bony as a clearing bank and we're getting the data in so the APIs that are set up and structured where the data is coming in, its real time, the interaction with our liquidity monitoring systems that we've been able to build.

And I think I won't say I'll say fairly seamlessly. not to say that there wasn't work in that case, but there is benefit to the network and scaling of the deployment.

So if you're working with a partner where you're working with a firm that has the ability to build, to build that network, then I would say, selfishly, that we, you work with somebody who's going to help do that.

And because they have an interest in building their network and it's going to be cheaper and easier for you because they want to get their network, their network off the ground. And that is certainly the case with some situations more than others.

So that's one of the things that it's critical to do, to say, okay, well, I'm going to connect to the existing infrastructure. I'm going to connect to my internal infrastructure, but do it in a way that is it's going to be able to work with what we view or what you view the future landscape to be knowing that there's going to be some uncertainty as Kelly mentioned.

If there this disparate set of projects going on, there could be some consolidation and we've made this joke before, but are you on MySpace? Are you on Facebook?

I'm not so sure, but if you're prepared, then it doesn't matter. It shouldn't matter. Being on MySpace will help you when you're transitioning to Facebook.

So I think that there's even if you get involved in something that ends up being going by the wayside, there's definitely value in that. But certainly, as I said, making those connections is really key.

Horacio Barakat

Thank you very much Tom and as really taking the last handful of minutes going through the very active Q and A chat box, I'll take that.

There was one question about how, what are the, what are the, how do you quantify the benefits, particularly on the dealer platform? I won't put in a particularly Tom on the spot, I'll take that on my own.

It, it depends on the use that you give to the, to the dealer platform. Obviously the savings that our clients can achieve there in the multiple million dollars.

Depending the use case, depending on the size, depending on the volume. Right. But I would answer that in a way without naming clients, that it is immediate and it is significant.

right? So it is in the multiple millions of dollars. So, and that's what we see the momentum on the platform. And hopefully that answered that question. And I think in the, in the last couple of minutes, what I would like to do is, and provide the opportunity to Kelly and Tom to provide a view of their vision around what we're seeing in terms of the transformation of capital markets via this new technology.

I'll kick it off with you, Kelly.

Kelly Mathieson

Yeah. It's yeah. I could probably have a whole webinar on this, but everyone. So, In, in, no, no, no, no, no.

In what I will say. It's nice to see among the Q and A, some blast from my past. So I'm glad to see some of the names in there.

What I would say is for all of the time that I've been in the security services and capital markets arena, which is more than three decades, I've always been in a market condition where the wage transactions are set up to process has been defined.

And technically it's been defined by market risk, credit risk, and a settlement risk if you will, but really it's only ever been defined by settlement risk, meaning how they actually process is what's the cutoff time.

Is it 45 minutes before the local custodian cuts it off? Is it an hour or two before the market is closed? It's always been defined by the edges of, or the boundaries of a system.

And before I conclude my time in this space, I would love to see what it means for securities and transactions and asset types when we're not bounded by that now.

And we're bounded settlement times don't mean anything system, the edges of systems and limitations. Aren't, what's gating us from being able to process a transaction.

And in theory, it is now only by how I feel about you Horacio or others as a counterpart. The counterpart or the credit risk, or how I feel about the transaction that we were doing.

And I think we've written about this before that it's a generational shift, and that's what we mean by it. That going to go from what have been decades of being defined by the operating infrastructure that supports a transaction to what will it be when that operating infrastructure is a bit unbounded.

And I think that is going to be an incredibly exciting thing to see. And I think it's probably not too far off.

Horacio Barakat

Thank very much Kelly. How about you Tom?

Tom Sullivan

Yeah. Yeah. I think that, I agree we talk about this for another hour probably, but I would maybe echo that a little bit and it's like kind of what you accept today as being what you can do.

I would say in the DLR project we've learned what our risk managers and what people know, think they know and what they actually know. Right. So I think that there's because of the lack of transparency from one system to another, or sorting form another that DLR is an example of, we've actually been able to provide more liquidity transparency and you in track more risk transparency than our risk department they, they asked for something that they'd never asked for before.

And we're like, well at first we said, well why do you want that? You don't have it now. And, but the concern on I head and say, but we can do that. We can, we can provide more real time transparency into the intra day cash.

You should say, as an example, but more broadly, it's like, well, if you're able to say, well, leveraging those things can change the roles of that people perform along the way to kind of create that greater transparency.

I'm really excited about the idea of having different products that move things forward, where you're intra day liquidity, which we really intend to talk about is one that really doesn't exist today, the intra day usage of repo and things like that.

And moving that forward where you're creating a market for something that people said, you couldn't do it before, because you were bound by trading limitation, system limitations, etcetera.

And then I think that the, you also have the potential to increase the participation in by using the various types and I think that there's a time and place for private permission, blockchain, like DLR is, and that a different the time and place for, for the public blockchain.

And I think that making that transformation as well, is really exciting in the sense that moving from what's viewed as the wild west of crypto to transforming our industry by leveraging public blockchain is something that I think is going to be happening in not to distant future.

So thank you.

Horacio Barakat

Thank you very much, Tom. As always, I think, unfortunately we have to cut, but we could, we could talk about another hour, but I know Kelly, Tom really appreciate your time.

This was a very, very insightful, hopefully was as helpful to the audience as it was to me. So really appreciate your time and really thank you for your time and actually for your comments.

There were, there were some questions that were unanswered, so we'll take the time and we'll reply to those appropriate people, but again, to the audience, thank you much for, for participating and feel free to follow up with any of the panel members.

Thank you very much. Have a good day.

Kelly Mathieson

Thank you everyone.

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