Delivery versus Payment on Distributed Ledger Technologies 

In August 2018, the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) announced a collaboration to develop Delivery versus Payment (DvP) capabilities for settlement of tokenised assets across different blockchain platforms. This will allow financial institutions and corporate investors to carry out simultaneous exchange and final settlement of tokenised digital currencies and securities assets, improving operational efficiency and reducing settlement risks. Deloitte together with Anquan and Nasdaq were appointed as technology partners for this project.

The DvP-on-DLT project is an extension of Project Ubin. This project seeks to achieve interledger connectivity and settlement finality for SGS with CDRs on separate DLTs.

To examine possible DvP settlement models and interledger interoperability, prototypes of different DLTs with varied capabilities and features were developed. These prototypes allow the transfer of tokenised assets such as SGS and CDRs on a trade-by-trade basis.

We observed that this setup provides the flexibility to compress settlement cycles and simplify post-trade settlement processes. The industry has taken actions to move from T+3 to T+2, shortening the settlement cycle and thereby reducing underlying risk exposures. DLT could potentially be an enabler for the industry to eventually compress the settlement cycle even further.

In addition, smart contracts for DvP could enable the consistent and coherent implementation of rights and obligations that will increase investor confidence and reduce compliance costs in the market.

The solution design of prototypes also enables a Recognised Market Operator (RMO) to maintain a central role to monitor and facilitate market functionalities. Given that investor security is of paramount importance, the solution possesses the following key design features:

• Account controls with multiple signature conditions
• Contract locks utilising secure secrets
• Time boundaries established for asset recovery
• Dispute resolution through arbitration
   

This paper will explore how DvP settlement finality, interledger interoperability, and investor protection may be realised using specific solution designs. In addition, it will highlight some future considerations for DvP-on-DLT and its impact on capital markets. This paper will also take a look at the private and public blockchain platforms employed by the appointed technology partners to create the prototypes used in this project.