Blockchain tech to be used in Canadian Securities Exchange (CSE)

The Canadian Securities Exchange is Canada’s upstart stock-trading platform, operated by CNSX Markets Inc. Recognized as a stock exchange in 2004, it aims to create competition in the securities clearing and settlement area using blockchain technology. CSE announced in February 2018, that it is launching an innovative securities clearing and settlement platform, based on the characteristics of blockchain technology.

This platform, CSE claims, will enable companies to issue conventional equity and debt through tokenized securities. Tokenized securities are any tokens that cannot pad the Howey Test and resident company shares. Experts believe this initiative will see the CSE move to a new service area called ‘Security Token Offerings’ or STOs, through which blockchain-based securities would be offered and sold.

(Richard Carleton. Source)

Unlike conventional blockchain-based cryptocurrencies, these STOs will be regulated–much like IPOs. Multiple applicable securities commissions will lay down rules for these blockchain-based securities.

Unlike initial coin offerings (ICOs) that often operate in a regulatory gray area, Canadian Securities Exchange plans to file an application to seek approval from the country’s regulators for recognition of the new clearing-house that it has recently launched and will soon be operating from. Thus, it will be providing real-time clearance and settlement with reduced costs and errors as compared to conventional clearing services.

Using technology licensed from Fundamental Interactions Inc. based out of New York, this clearing-house platform, if approved, would serve as a rival to TMX Group owned, Canadian Depository for Securities Ltd. (CDS). CDS has served as Canada’s main securities and fixed income clearing and settlement hub for a long time and operates both the Toronto Stock Exchange and the TSX Venture.

There are several other advantages that CSE’s blockchain-technology based platform will bring to the table:

1. Reduction of cost and error-reductions: Costs involved in processing corporate actions like splits, consolidations, and dividend payments will be reduced substantially with the introduction of the new platform.
2. Minimize risk of investment for brokers and their clients: This will be done by ensuring that trades clear and settle immediately. Current equity clearing processes requires two full business days after the trade date to settle each trade.
3. Larger participation in tokenized security markets: The platform will not only bring forward a new category of investors but will also enable better shareholder communications, thus making STOs a better marketplace.

Kabuni Technologies, a Vancouver based 3-D printing company, might just be the first company to issue an STO–pending approval from the British Columbia Securities Commission. So, if you’re in Canada and wish to own a part of Kabuni Technologies, you can do it through the blockchain based tokenized system!