Australian Bond Exchange’s tech to reduce bond trading settlement time

Australian Bond Exchange Holdings Limited presented a live demo of its direct to client self-service bond trading platform, as part of a joint research project to explore use cases for a central bank digital currency (CBDC) run by the Reserve Bank of Australia (RBA).

What is the market offering of ABE’s technology?

Contributing to the ongoing research into the desirability and feasibility of CBDC in Australia, the pilot project is overseen by senior representatives of the Digital Finance Cooperative Research Centre (DFCRC) in conjunction with the RBA and the Australian Treasury.

As demonstrated in the first live demo, ABE has a bond trading platform targeted at retail and institutional investors which is connected to a Transaction, Execution and Settlement Engine (TEASE) which has illustrated proof of concept in the CBDC’s sandbox environment.

Bonds settle on a Trade + 2 days (T+2) basis, but when CBDC is used as a settlement asset, Aussies will be able to trade and settle bonds in near real-time (typically less than 5 seconds).

What does the technology mean for the industry?

Commenting on the successful pilot program, Chief Executive Officer Bradley McCosker said, “We are proud to be taking part in the CBDC Pilot Program to explore new methods of delivering economic and social value, with support from the RBA and key regulators.”

“The success of today’s live demo is a significant step forward in reducing the world bond settlement time from T+2 days to near real-time, in alignment with our goal to make bonds more accessible to Australian private investors. This technology will reduce counterparty risk, reduce settlement failure risk and enable atomic settlement of transactions,” he added.

“Also ABE supports the RBA’s goal of creating digital currencies to facilitate commerce in the emerging blockchain economy and benefit the Australian financial system and economy.”

The live trades will be performed in May using real eAUD, followed by a final demo day to mark the conclusion of the pilot program at the end of May. A report and an assessment of the various use cases developed, will be published at the conclusion of the project.