Vanguard, the world’s second-largest index fund manager, has announced the successful completion of the first phase of its blockchain pilot trialing the digitization of asset-backed securities (ABS).
The pilot has seen Vanguard partner with a large U.S.-based ABS provider, distributed ledger technology provider Symbiont, and financial institutions BNY Mellon and Citi, to model the full life cycle of securities settlement using a distributed ledger technology network.
Vanguard and Symbiont envisage later phases of the pilot will integrate smart contracts into the ABS issuance and settlement process, offering “increased information flow, enhance[d] price discovery and secondary market liquidity” and the automated execution of “key corporate actions”.
As of April 30, Vanguard managed $5.7 trillion in assets globally, offering more than 425 funds to 30 million investors.
Vanguard to digitize securities with DLT
Warren Pennington, the head of Vanguard's Investment Management FinTech Strategies Group, described the pilot as forging “a more efficient business model for future generations of capital market activity”.
“By digitizing and streamlining the ABS issuance process, we will be able to increase the speed and transparency of transactions while reducing costs and minimizing exposure to risk.”
Mark Smith, Symbiont’s chief executive, described the competition of the pilot program as “a momentous step forward in fundamentally changing capital markets infrastructure through blockchain technology,” adding:
“2020 may be the year that, for the first time, market participants will see a live ledger-based issuance."
Symbiont and Vanguard partner in 2017
Vanguard first partnered with Symbiont in December 2017, revealing an initiative to leverage blockchain technology to improve price index data distribution. The platform went live last year, with Vanguard using Symbiont’s DLT to consume data for funds worth $1.3 trillion combined.
In October 2019, Vanguard Group announced it had begun testing a peer-to-peer currency trading platform Symbiont’s technology.