In 2019, DTCC began researching the U.S. private markets, including alternatives, to evaluate modernization opportunities based on unmet client needs, new technology and DTCC’s ability to provide robust and resilient market infrastructure.
Following extensive evaluation of the private markets and the drivers for digitalization, in May 2020, DTCC published a case study on Project Whitney, a multi-phase project to address a range of issues, including manual processes, market fragmentation, regulatory uncertainty and a lack of trusted providers. <
Related: Exploring the Value in a Modern Digital Infrastructure for Private Market Securities
The industry response to Project Whitney was overwhelmingly positive, which served as a catalyst for deeper and more comprehensive collaboration with clients and stakeholders to further understand the challenges and pain points in private markets in their ‘traditional’ format, as well as new issues created by security tokenization.
The results of that stakeholder collaboration and engagement are shared in a new industry report, Digital Securities Management: Bringing Private Markets Infrastructure Into the 21st Century. The DSM platform will, for the first time, provide an industry-wide solution that offers common market infrastructure and standards across private markets. The platform represents the next major milestone in DTCC’s efforts to bring automation, standardization and efficiency to the private markets, building upon Project Whitney.
The new DTCC DSM platform will support securities through their full life cycle, and will provide broad benefits to the entire private market ecosystem including:
- reduced operational costs through standards and increased automation, including security identifiers, T+1 gross settlement and electronification of transfer restriction approvals;
- cost mutualization of non-differentiated services, such as centralized stock record keeping and codification of transfer restrictions; and
- ability for broker-dealers to hold customer assets while relying on DSM as a “Good Control Location” for both traditional and tokenized securities, fulfilling Customer Protection Rule requirements.
“DSM is capable of transforming the private markets, unifying an increasingly fragmented space under a common infrastructure that can automate manual processes, reduce costs and risks, and open up more opportunities for investors,” said Jennifer Peve, DTCC Managing Director, Head of Strategy and Business Development. “DSM is the culmination of a hugely collaborative effort with our clients, industry representatives and other key stakeholders, whose feedback was critical in developing a solution to modernize, digitalize and ultimately transform the private market ecosystem.”
DTCC is currently in the production build phase of the DSM platform and, subject to final regulatory approval, is expected to launch the service in early 2022.