Bank of Montreal Trials Blockchain in Fixed-Income Issuance

Bank of Montreal Trials Blockchain in Fixed-Income Issuance

Canada’s Bank of Montreal and Ontario Teachers’ Pension Plan have carried out a transaction on blockchain, the goal being to assess the viability of the technology in the securities market.

During the trial, Bank of Montreal issued a C$250 million ($190 million) one-year floating-rate deposit note to the Ontario-based pension fund. The bank used blockchain to mirror the transaction, which was booked as a traditional issuance via the Canadian Depository for Securities. Bank of Montreal’s BMO Capital Markets division has developed a prototype blockchain-powered settlement system which permits issuers and buyers to monitor transactions.

Based on the trial results, the lender concluded that the technology was able to cut costs in several areas, including compliance, clearing and settlement of cash transactions, and financial reporting. According to the parties, this is the first Canadian dollar fixed-income transaction that validates the use of blockchain.

Kelsey Gunderson, who runs global trading at BMO Capital Markets, commented on the experiment:

“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.” “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,” he added.

Audrey Gaspar, Ontario Teachers' managing director of Treasury and Integration, noted that the fund was committed to experimenting with innovative technologies to better serve its members.

Blockchain has already been tested for similar projects this year. JPMorgan and National Bank of Canada (NBC) experimented with the technology in April, issuing debt-related financial instruments. During the trial, the NBC sold $150 million of one-year floating rate Yankee certificate of deposit and paralleled the deal via a blockchain system provided by JPMorgan.

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