Israel to launch blockchain-backed securities lending platform

August 3, 2020
By Nicholas Say

The TASE has announced it will be launching a central securities lending platform backed by blockchain technology

The Tel Aviv Stock Exchange (TASE), Israel’s public stock exchange, announced it will be launching a Central Securities Lending Platform backed by blockchain technology.

The Israeli market currently has its securities lending performed by banking groups that use internal mechanisms between banks.

A blockchain based platform could offer a more efficient and transparent platform for the market.

If this new technology is shown to be beneficial in Israel, it could be used in other markets that rely heavily on bank-to-bank OTC contracts — like the global derivatives market.

Blockchain can transform the securities lending market

The blockchain-backed platform will disrupt the securities lending market in Israel by creating an ecosystem where major financial institutions will be able to engage in direct lending.

The TASE expects the platform to operate as a one-stop-shop for all transactions and services related to securities lending activities; by opening the doors to a larger pool of securities within a shorter period of time and positions.

Members of the exchange have already been able to try the platform by using an initial testing environment they accessed in March, enabling them to test lending transactions and start the process of adapting their systems to integrate with the platform once it enters its production phase.

Extra security and transparency with blockchain

The TASE is aware of the extra security benefits that blockchain provides and its importance for the future of financial markets. It is also interested in the benefits of direct peer-to-peer (P2P) transactions and smart contracts, which will simplify transactions and automatise much of the process.

All of these features should benefit the exchange platform, as well as custodians and clients in the form of reduced costs and added transparency, which will ultimately increase the potential of the market as it attracts new investors.

Orly Grinfeld, EVP and Head of Clearing at TASE, referred to the application of blockchain by stating that, “The Blockchain technology will present a new level of safety for securities lending and will support growth for transactions based on this new platform”.