The Thai Bond Market Association (TBMA) recently announced that they will be adopting the blockchain technology to help them cut the issuance times in more than half. They are planning to roll out the new registrar platform to practice during this year to improve the growth of the secondary market. TBMA’s president, Tada Phutthitada, wants to deploy the new registrar as early as possible to start with the live experimentation.
If everything goes well, they will officially roll out the platform for regular use which will make it the first fintech platform that applies to both, the Bank of Thailand, and the country’s Securities and Exchange Commission (SEC).
Right now, it takes them 7-15 days to issue bond certificates. With the help of the new registrar, they would be able to start issuing bonds within 3-4 days. That’s during the practice period when they will be optimizing the platform even more. Their ultimate goal is to reduce that time to just two days. The reason why it takes them 7-15 days right now is that they need physical certificates to be processed. Once the blockchain technology is put into effect, the book entries will be more than enough to present the holding and settlement of securities.
And according to Phutthitada, the faster the bondholders get their certificates, the faster they will be able to start trading in the secondary markets. And the quicker that happens, the better it is because that also reduces the settlement risk for bond investors.
Here’s what he said:
“The faster bond certificate issuance allows bondholders to trade in the secondary market faster and reduces settlement risk for bond investors. If nothing is done to speed up bond certificate issuance, the growth of corporate bonds in the secondary market could be limited.”
And it will become a big issue for the country if the secondary market is limited because in the past 6 years, the secondary market has registered incredible growth. Slowing down that growth just because of slower bond issuance would lead to slower growth, and drive bondholders to other investment venues, which would then result in lower volume in the secondary markets.
The platform that TBMA is working on will run on a private blockchain and will make use of a smart contract to operate it. The investors will have to register to be allowed to use the platform. Not only investors, the bond issuers, registered companies and even the regulators will have to register to use it.
Right now, they are planning to offer features like a bond subscription system, bond settlement information, and a verification system for bond transactions. They will be revealing some other features at a later date.