Thursday, November 14, 2019
Guidelines for Tokenized Securities Laid By Global Post-Trade Market Infrastructure Giant, DTCC

The Depository Trust & Clearing Corporation (DTCC) which is a global post-trade market infrastructure giant published guidelines outlining regulatory principles for the post-trade processing of tokenized securities. DTCC announced the news of the white paper in an official press release on Wednesday, March 13. The white paper will target the regulators along with other market participants in order to identify the attributes which are unique to the emerging tokenized security asset class and its market structure. DTCC proposed following in the press release:
“The market for trading crypto assets that are security tokens where the post-trade processing uses distributed ledger technology (DLT), has created a need for safety, security, and reliability around these transactions to protect market stability.”

While the white paper states:
“If a Security Token Platform performs the same or a substantially equivalent function as an existing market infrastructure, thus exposing investors and other market participants to the same type of risk, the legal and other requirements applicable to that function should be the same regardless of whether the function is being performed by an existing market infrastructure or as part of a Security Token Platform.” The guidelines ensure that post-trade crypto assets handling platform has enforceable legal basis along with identifiable governance structure.

The guidelines outline that in some cases, principles that have been created by international standard-setting bodies and other “existing regulations might not squarely apply.” If the regulators, security token platform operators, and other market participants are advised to determine the legal and other requirements based on the platform’s functions and services by the DTCC, implies that the prospective risks are involved. DTCC divided those into custody, principal, and operational risks.

The managing director and head of global public policy at the DTCC, Mark Wetjen passed a statement emphasizing that:
“ [U]sually [most people are] focused on what happens before or to the point of execution of a trade. But what occurs after a trade is executed is critically important and this […] has not been broadly discussed within the context of tokenized securities or crypto assets more generally”

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