Yesterday, U.S.-based asset management firm Northern Trust partnered with blockchain firm BondEvalue to deliver asset servicing and digital solutions for the latter’s bond trading platform. BondEvalue launched BondBlox, representing $1,000 in fractional ownership of a conventional bond.
The Singapore-based startup was recently approved to enter the Monetary Authority of Singapore’s (MAS) Sandbox Express to launch the blockchain bond exchange. The goal is to reduce the minimum investment amount of bonds and open up the market to more investors, making bond trading as easy as equities.
Another aspect of the platform is reducing settlement time. Most bonds trade over the counter, i.e. through securities firms and brokers, instead of an exchange. This makes the bond prices opaque and the process inefficient. By moving bond trading onto a blockchain, investors get a better view of the bond prices and can enable instant settlement electronically.
Rahul Banerjee, founder of BondEvalue in a previous announcement said: “The bond market should not be restricted to just the affluent but rather be accessible to all, like equities.”
The blockchain platform connects to banks, wealth managers and robo-advisers, giving their clients access to trade BondbloX. In this case, Northern Trust will be an exclusive asset servicing provider for the platform.
“Our partnership with BondEvalue has the potential to allow a wider group of investors access to investments which were historically only available to larger institutions,” Justin Chapman, global head of Market Advocacy & Innovation Research at Northern Trust.
“As we journey towards making bonds more widely accessible, we are delighted to have Northern Trust as a partner who offers investors and exchange participants the confidence in the integrity of the platform offering,” added Banerjee.
BondEvalue’s blockchain platform is based on Hyperledger Sawtooth. It signed a partnership agreement with Northern Trust on the same day it joined the MAS sandbox but made the announcement today.
Meanwhile, Northern Trust has been exploring blockchain applications for its businesses. Last year, the firm launched a blockchain administration system for the private equity market developed with IBM. It later expanded the service offering to include legal smart contracts and live capital calls. However, the company has since transferred the blockchain system to Broadridge, to make it available to the entire asset servicing industry as opposed to just Northern Trust clients.
Blockchain for bonds has several applications, which can be seen by use cases from green bonds to vanilla corporate bonds. The most discussed is the World Bank’s bond-i, which has raised a total of $108 million to date.
