• The triple revolution in securities post-trade

June 2022

Digital assets custodial capabilities are under scrutiny and digital ecosystems such as decentralised finance (DeFi) and stablecoins in the cryptocurrency space have expanded the post-trade possibilities. Our new flow special white paper explains the implications for post-trade securities services

In May 2019, Deutsche Bank’s white paper, Transitioning into the future of securities post-trade, highlighted the persistent industry structural margin compression, declining profitability from relatively high static costs and potentials for digital assets to reorder the industry structure to realise new growth sources for the traditional post-trade industry.

Three years on, digital assets have expanded and established under the umbrella of three large ecosystems, with further specialised sub-ecosystems, such as decentralised finance (DeFi) and stablecoins in the cryptocurrency space. The prospects of new revenue sources and a new operating environment, first highlighted in 2019, are also clearer – as are the demands on market participants, which include managing emerging risks and acquiring the necessary expertise to support value creation in this new environment.

New market structures are being created

The digital assets ecosystems are attracting new participants into the market, expanding the roles of incumbent intermediaries like custodians and prompting existing market structures to evolve.

The value represented by programmable digital assets can now include necessary information to change the cost of safety and soundness compliance even as transfers are made even more efficient. Interoperability for a digital asset custodian is a new asset protection capability while workflows modelled on – or after – distributed ledger technology (DLT) are proving that they can save costs and allow new operating models like direct issuer-investor distribution – and their convergence will gradually re-ordering the competitive dynamics.

Taking our lead from the Bank of France Governor, we are calling these changing elements – digital assets, intermediary roles and market structure – the three revolutions in the securities post-trade industry. Together, they represent a major transformation driver and the core elements of the digital asset supercycle journey on which we have embarked.

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