As Mike Bodson accepted a retirement gift from employees in late June, he smiled broadly as he lifted a digital frame displaying a non-fungible token (NFT) — the first-ever created in DTCC history. The NFT — a coin inscribed with three of the most important words in the DTCC lexicon, “Settlement is complete”— was a fitting tribute for a leader who early on in his tenure pledged to make innovation a hallmark of his agenda.
“The NFT was a great surprise, and I appreciate that it reflects the commitment and passion we’ve brought to building on DTCC’s legacy of leading digital transformation for ourselves and the industry over the past decade,” Bodson said.
Innovation has been central to DTCC’s success since the firm was founded nearly 50 years ago to resolve the “paper crisis.” At that time, DTCC created the first electronic security — a key innovation that helped usher in a new era where stock information and data would be stored and managed digitally to bring automation, lower costs, risk mitigation and greater efficiency to the U.S. capital markets. Since then, DTCC has played an instrumental role in implementing similar improvements in the fixed income, mutual fund and derivatives markets, among others. In the process, the firm developed a reputation for standing at the forefront of digital transformation.
Bodson focused on building a culture that encouraged innovation and made strategic investments to help fully leverage the power of new technologies, including DLT, cloud, APIs, machine learning and artificial intelligence.
Building a Culture of Innovation
Bodson set a stake in the ground for DTCC during his first global employee meeting as CEO in 2013, telling colleagues that the firm has “exciting opportunities to play a more impactful role in the industry, to help our clients meet new regulatory demands and financial challenges and to seize opportunities for expansion and growth.” He delivered a similar message in dozens of client meetings during those early months.
To bring his vision to life, Bodson focused on building a culture that promoted and encouraged innovation and made strategic investments to strengthen the capabilities needed to fully leverage the power of new technologies, including distributed ledger technology (DLT), cloud, application programming interfaces (APIs), machine learning and artificial intelligence (AI).
The timing proved prescient as a series of market dynamics and a fast-moving regulatory environment in the mid-2010s prompted clients to demand “faster, better, less expensive” solutions that would address key operational issues immediately, rather than waiting for long-term solutions.
Driving Change Through Digital Transformation
Bodson’s foresight positioned DTCC to provide industry leadership as fintech and digitalization gained additional momentum. It also enabled DTCC to undergo its own digital transformation to remain relevant in a marketplace that was quickly evolving. As Bodson often remarked, “If anyone is going to disintermediate DTCC, it will be DTCC. We will lead the transformation, not follow it.”
While Bodson often stressed that innovation can take many forms and doesn’t always require new technology, DTCC’s pioneering work with DLT and cloud, in particular, often drew global attention. Among the most notable initiatives launched during Bodson’s tenure were:
- DTCC's North America Data Repository, which provides data reporting services for derivatives in the U.S. and Canada, incorporated cloud technology when it began publishing real-time price reporting to the public on Dec. 31, 2012, based on requirements in the U.S. Dodd Frank Act.
- As DLT exploded on the scene, DTCC issued a seminal white paper in January 2016, “Embracing Disruption: Tapping the Potential of Distributed Ledgers to Improve the Post-Trade Landscape,” that described blockchain’s potential to re-imagine the post-trade infrastructure but also cautioned that it is not a cure-all to address every industry challenge.
- That March, DTCC hosted one of the first major DLT conferences, the DTCC 2016 Blockchain Symposium, with nearly 500 industry professionals in New York. In November, DTCC and The Centre for the Study of Financial Innovation, hosted another 150 industry stakeholders at the Disruptive Technologies Forum 2016 in London.
- In 2017, DTCC began a ground-breaking project to re-platform its credit derivatives Trade Information Warehouse (TIW) on distributed ledger technology (DLT) and cloud.
- The following year, DTCC—along with Accenture, Digital Asset and R3—released a study that found DLT could support average daily trading volumes in the U.S. equity market of more than 100 million trades per day.
- In early 2020, the firm launched its API Marketplace to provide clients, partners and internal developers with a central location for APIs developed by DTCC to streamline access to services and improve the user experience.
Along with that work, the firm currently has several initiatives underway using combinations of DLT, APIs, cloud and AI that promise to reshape key areas of the industry. These include the Digital Securities Management (DSM) platform for the private markets; Project Ion, an alternative settlement platform; and Project Lithium—with the Digital Dollar Project—to explore how a central bank digital currency might operate in U.S. clearing and settlement.
Seeing the Future
A critical part of DTCC’s innovation culture is recognizing the need for fundamental change. The growth of digital assets, such as tokenized securities and crypto currencies—with the proper governance and standards—is likely to mean that DTCC and other financial market infrastructures (FMIs) will change as well. “I see FMIs moving from the traditional ‘securities for cash’ model to become ‘asset transfer facilitators’ that can process any type of securities transactions,” Bodson said.
Bodson is confident that DTCC’s new CEO, Frank La Salla, will continue to build upon the firm’s legacy as a leader on innovation while ensuring that DTCC’s mission will not change: Hold and protect any representation of an asset—digital or otherwise—to safeguard the security of the global financial markets.