The Prague Stock Exchange is adopting distributed ledger technology (DLT) for the settlement of securities under the EU’s DLT pilot regime. This regime has been operational in the EU since March 23, 2023, serving as a temporary regulatory sandbox to encourage the development of innovative market infrastructures, including DLT settlement systems.
CSD Prague has become the first institution globally to receive authorization under this regime. Christoph Boschan, CEO of the Vienna Stock Exchange, remarked, “DLT is often associated with blockchain and cryptocurrencies, but it also presents a valuable opportunity for us as an infrastructure service provider to enhance efficiency and transparency in securities settlement. We are proud to work on pioneering technological advancements within the capital market.”
The consensus mechanism within the DLT synchronizes all participants in a transaction, allowing for the management of securities accounts and the subsequent transfer of shares or bonds during activities such as initial subscriptions, capital increases, or transfers from other accounts. Boschan emphasized that settling transactions via DLT could simplify the booking of securities, thus reducing the administrative burden for issuers and security holders.
Financial service providers can join the DLT network offered by R3 Coda, enabling them to open DLT accounts for their customers and record transactions within their applications. This creates additional value for companies with employee participation plans, fintech firms, and crowdfunding platforms. Moreover, for small and medium-sized enterprises (SMEs), the ability to subscribe to bonds or shares without intermediaries presents an alternative financing method.
Private investors will also have the opportunity to open accounts with CSD Prague via Bank ID and access them through web or mobile applications. Petr Koblic, member of the Board of the Vienna Stock Exchange and CEO of the Prague Stock Exchange, stated, “During the implementation of the project, we benefited from two key advantages: integrated post-trading through CSD Prague, which provides a comprehensive overview of all processes related to registration and settlement, and our expert IT team with 20 years of experience in the securities business. This expertise allowed us to develop the system in a very short timeframe.”