Spanish Stock Exchange to Go Live With Blockchain Collateral Pledge Certificates

Bolsa de Madrid (BME), Spain's largest stock exchange, said it expects to go live by year-end with a blockchain-based system for certifying collateral pledges after testing the technology.

The test "has shown a reduction in the total times of end-to-end processes exceeding 80 percent," BME said Thursday, as well as the potential to radically improve the participants’ operational and risk management. The system allows market participants to avoid exchanging paper certificates and monitor the process in real time, the exchange said.

The proof of concept (PoC) was developed by BME’s own distributed ledger technology division DLT-Lab, in collaboration with regulators and other financial institutions, BME said, including BME subsidiary BME Clearing; the Spanish central securities depository IBERCLEAR; and investment bank Renta 4 Banco, which pledged collateral to cover customers' positions.

"DLT technology allows us to reduce times drastically and improve the operation and control of the system, providing legal certainty for electronically generated certificates and maintaining privacy and compliance with the General Data Protection Regulation," Berta Ares, head of digital transformation at BME, said in the press release.

Teresa Sánchez Alonso, head of IT systems at Renta 4 Banco, added that "this innovation project is aligned with the strategy of digitization, automation and continuous improvement of Renta 4 Banco’s customer service.”

This is not the first time BME has dipped its toe into the blockchain world: last summer it contributed to a joint pilot project of several Spanish banks named Fast Track Listing (FTL).

The pilot, testing blockchain tech for registering stock warrant issuances, also included institutions such as the Spanish National Securities Market Commission (CNMV), Banco Santander, BBVA, BNP Paribas, CaixaBank, Commerzbank and Société Générale.

Image of Bolsa de Madrid via Shutterstock