The Tel Aviv Stock Exchange (TASE) will launch a central blockchain securities lending platform. It is promising that this will offer “innovative and groundbreaking financial technology”.
Orly Grinfeld, EVP and Head of Clearing at TASE: “The Tel Aviv Stock Exchange is proud to present this first-of-a-kind lending pool, a safe, cutting-edge and state of the art platform. The Blockchain technology will present a new level of safety for securities lending and will support growth for transactions based on this new platform. TASE is a global financial innovation leader, and strategically pursues the technological advancement of the capital market.”
The need
There is currently no central securities lending platform in the Israeli market. Securities lending is at present executed:
- using inter-bank mechanisms
- within, and if necessary outside, banking group limits.
As a result, the market has not been fully exploited to satisfy the potential needs of economic agents operating in Israel.
The proposed TASE platform
TASE is committing itself to deliver a cutting-edge platform which will transform the securities lending market in Israel. It will do this by enabling direct lending among all the major financial instruments.
In effect the platform will:
- function as a one-stop-shop for all securities lending activities
- permit access to larger securities volumes within shorter timeframes
- operating across shorter-term positions.
In March 2020, TASE members had access to an initial testing environment. They used this to:
- test lending transactions on the new platform
- adapt their systems in preparation for the production phase.
The use of Distributed Ledger Technology (or blockchain) as the basis of TASE’s new trading platform will harness some of a blockchain’s primary advantages and features. These include:
- direct peer-to-peer transactions
- Smart Contracts
- enhanced security
- immutability.
Enterprise Times: what does this mean
Blockchain is making yet another inroad into the financial infrastructure underpinning stock markets. Just as with other stock exchanges (for example in Spain and Chile), so the TASE has been making progress.
The result, to become available in November 2020, is expected to benefit not only TASE itself but also custodians and their clients – by reducing costs, increasing security and enabling the market to exploit its full potential. Whether it will be as innovative a platform as TASE claims will become clearer by early next year. But it should enable direct lending of major financial instruments between capital market participants.