First Canadian dollar fixed income issuance by a major bank in Canada testing blockchain technology
Bank of Montreal Capital Markets Launches First-of-its-Kind Blockchain Pilot to Mirror Canadian Dollar Fixed Income Issuance Transaction
August 15, 2018
TORONTO, Aug. 15, 2018 /CNW/ - BMO Capital Markets today announced that it has successfully launched a pilot fixed income issuance transaction, mirrored on a blockchain platform alongside leading pension fund investor Ontario Teachers' Pension Plan (Ontario Teachers').
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, making it the first Canadian dollar fixed income issuance demonstrating the viability of blockchain platforms.
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 used for fixed income markets.
BMO Capital Markets designed and built a blockchain issuance system 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 and 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.
"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."
"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."
Building on the successful launch of the prototype, BMO Capital Markets will look to continue to partner with clients and other institutions in the evolution of blockchain as an open settlement system.
About BMO Capital Markets
BMO Capital Markets is a leading, full-service North American-based financial services provider offering corporate, institutional and government clients access to a complete range of products and services including equity and debt underwriting, corporate lending and project financing, merger and acquisitions advisory services, securitization, treasury management, market risk management, debt and equity research and institutional sales and trading. With approximately 2,500 professionals in 30 locations around the world, including 16 offices in North America, BMO Capital Markets works proactively with clients to provide innovative and integrated financial solutions.
BMO Capital Markets is a member of BMO Financial Group (NYSE, TSX: BMO) one of the largest diversified financial services providers in North America with $744 billion total assets as at April 30, 2018.
About Ontario Teachers' Pension Plan
The Ontario Teachers' Pension Plan (Ontario Teachers') is Canada's largest single-profession pension plan, with $189.5 billion in net assets at December 31, 2017. It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an average annualized rate of return of 9.9% since the plan's founding in 1990. Ontario Teachers' is an independent organization headquartered in Toronto. Its Asia-Pacificregion office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario's 323,000 active and retired teachers. For more information, visit otpp.com.
Source: BMO Financial Group