Same-day trade settlements will be allowed with Bank of America and Paxos partnership

Same-day trade settlements will be allowed with Bank of America and Paxos partnership

Blockchain technology is currently used for settling stock trades, by the second-largest bank in the United States

A platform capable of same-day settlement of stock trades using blockchain technology, has been joined by the Bank of America, which is known as Paxos Settlement Service. Also, the bank “has been conducting internal transactions for the past few months” and would offer the service to Bank of America clients upon approval as a clearing agency, according to Kevin McCarthy, head of financing and clearing

Also, compared with that of the Depository Trust & Clearing Corporation, or DTCC, in which Bank of America is a direct participant, the move would reportedly allow for a “more flexible and speedier” stock settlement system. Whereas Paxos’ service is capable of settling some stock trades in minutes, while the DTCC settlement time is roughly two days

“We can determine the settlement cycle down to T+0,” said McCarthy. “We then can free up the collateral we’d have to post on an overnight basis. […] The return-on-assets in this business would improve, which has been a challenge.”

Paxos officially launched its settlement service for equity trades in 2019 after receiving no-action relief from the U.S. Securities and Exchange Commission. Credit Suisse, a Zurich-based financial institution, and Instinet, the trading arm of Nomura Holdings, both participated in the pilot, settling U.S.-listed stock trades on the same day.

 

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