BMO Capital Markets, the investment banking subsidiary of Canadian Bank of Montreal, successfully launched a pilot fixed-income issuance transaction that mirrors a blockchain platform in conjunction with leading pension fund investor Ontario Teachers’ Pension Plan. The transaction included Bank of Montreal as the issuer and Ontario Teachers’ as the buyer of a CDN$250MM 1-year floating rate Deposit Note, which makes it the first Canadian dollar fixed-income issuance using a blockchain platform.
The pilot transaction–booked as a traditional Canadian Depository for Securities (CDS) issuance and successfully paralleled through the blockchain–was conducted to demonstrate how smart contracts and blockchain could be utilized in the fixed-income markets.
“This is an important first step in developing a fully functional blockchain capability that we think will eventually allow primary and secondary trading of securities,” said Kelsey Gunderson, Head of Global Trading, BMO Capital Markets. “We understand the potential that blockchain brings to the capital markets and we look forward to continuing to drive innovative solutions to help our clients.”
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BMO Capital Markets designed and built a blockchain issuance system by using open source blockchain infrastructure with the goal of testing a next generation settlement system. The prototype allows the security issuer and buyer to view the transaction on the blockchain, as well as verify the accuracy of the term sheet information and payment amounts until maturity of the fixed-income security.
The technology is intended to enable cost reduction in several areas including compliance, financial reporting, security clearing and settlement of cash transactions. BMO Capital Markets will continue to partner with clients and other institutions in the evolution of blockchain as an open settlement system.
“Ontario Teachers’ is committed to exploring technology and innovations that might improve our ability to serve our members,” said Audrey Gaspar, Ontario Teachers’ Managing Director, Treasury and Integration. “We are pleased to partner with Bank of Montreal in this pilot blockchain initiative.”
BMO Capital’s use of blockchain technology trends toward an increased use in financial applications. Per a report, the four biggest auditing firms globally – Deloitte, EY, KPMG and PwC – are part of a group of 20 banks in Taiwan that are experimenting with blockchain technology for auditing financial reports.
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