Yesterday MUFG announced the results of the Security Token Research Consortium’s work towards creating a Japanese infrastructure for tokenized securities. A key requirement is to have a functioning secondary market, and SBI’s previously announced Osaka Digital Exchange (ODX) will take on that role.
In terms of the blockchain platform that will hold the securities records, that will be MUFG’s Progmat securities platform. The aim is to enable other securities firms to connect to Progmat.
So far, nine securities companies have signed up. These include Daiwa Securities, Tokai Tokyo Securities, Mitsubishi UFJ Morgan Stanley Securities and its joint venture partner Morgan Stanley MUFG Securities, au Cubcom Securities, SBI Securities, SMBC Nikko Securities and two unspecified members. However, there are now 62 firms involved in the Consortium.
Osaka Digital Exchange plans to operate as a Proprietary Trading system (PTS) which is similar to the U.S. Alternative Trading System (ATS) as opposed to a stock exchange. It’s responsible for the trade matching with plans for an auction system for pricing. ODX will integrate with Progmat for all post-trade processes.
To minimize the risk to a real time gross settlement (RTGS) system, the plan is to link Progmat to a digital currency platform. Additionally, the digital currency system and Progmat will provide automated lending, reducing the need for intraday liquidity via the RTGS. Another feature is the potential for direct transactions between investors (P2P) to limit the settlement risk between Japan and China.
In terms of timescales, the plan is for Progmat to specify APIs for other securities companies to connect to the platform by mid-2022. And the DLT network will be opened up by the end of the year. ODX plans to go online in 2023.
Progmat uses R3’s Corda enterprise blockchain. Most of the technology partners also have Corda expertise. They are NTT Data, Daiwa Institute of Research, Nomura Research Institute and SBI R3 Japan.
Meanwhile, in August, MUFG launched an asset-backed security (ABS) on the Progmat platform by tokenizing real estate from Kenedix. Nomura and SBI acted as underwriters and brokers, and MUFG Trust was the custodian.