Financial services:
Eager to disrupt itself?
TCS BaNCS #BancsDL and #DLGateway to support
distributed ledgers side-by-side with vintage systems
By N Ganapathy Subramaniam
President, TCS Financial Solutions
Financial institutions have figured out how to originate
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extremely confident that settlement would take place.”
and execute trades that entail one firm to sell a share and
That proposal was almost two decades ago. Not
another to buy the same. But it still takes two to three
enough has been done to require market participants to
days to settle the trade in most markets. Even so, there is
“pre-position” their assets and, if the transaction involves
no guarantee that a buyer can pay for the shares, nor any
an extension of credit, to make sure that credit is solid at
regulation in place compelling sellers to confirm, in ad-
the time a trade is placed.
vance, a buyer’s wherewithal to pay, even though central
On the money side, transformation is taking place the
counterparty clearing (CCP) entities provide some guar-
world over for instantaneous transfers of both high-value
antee, keeping the chain unbroken.
and low-value payments.
What’s missing is being able to guarantee two things
Recently, India launched the Unified Payments Inter-
in advance of a transaction: first, that sellers actually pos-
face (UPI). The new platform, a brainchild of outgoing
sess the assets that they claim; and second, that buyers
Reserve Bank of India Governor Raghuram Rajan, works
possess the readily-available wealth enabling them to buy
on single-click, two-factor authentication. A smartphone
these same assets. In this age of instant gratification, it’s
user can instantaneously send or receive funds, 24x7,
time for another “KYC” – “Know Your Counterparty.”
across banks, using only a virtual address and requiring
Arthur Levitt, former chairman of Securities and Exchange
no other sensitive information. India has prepared the
Commission, proposed this as a part of a move to same-day
infrastructure for a cashless economy, and similar efforts
settlement:
are progressing across the globe.
“Faster settlement would further reduce the risk of loss to
The markets will continue to grow and transform as
investors and intermediaries from the insolvency of other
they will. Electronification will make sure that exchanges
market participants. Same-day settlement would require
of value happen even more rapidly for greater amounts
market participants to ‘pre-position’ their assets and, if the
than ever before. Clearly, there will be more trading
transaction involved an extension of credit, to arrange for
activity, more trading venues and more shares and money
that credit at or before the time a trade was placed. This
changing hands than ever before, with the electrons of
would reduce ‘fails’ by several more percentage points. In
these electronic transactions traversing both emerging
such an environment, people trading in the market could be
and established markets in a flash.