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DTCC explores publishing fund NAV data on blockchain with JPM, BNY Mellon and Chainlink – Ledger Insights
Today the DTCC announced the result of a proof of concept (PoC) that explored recording fund net asset value (NAV) data on a blockchain. For the Smart NAV trial, DTCC partnered with Chainlink Labs for technology and asset managers, fund administrators and custodians. Jennifer Peve, global head of strategy and innovation at DTCC, mentioned the project earlier this year when she discussed the DTCC’s take on tokenization.
The ten participants in the Smart NAV study were American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JP Morgan, MFS Investment Management, Mid Atlantic Trust d/b/a American Trust Custody, State Street and US Bank.
The goal was to distribute data rather than collect it. THE DTCC It already collects data from asset managers and distributes it via its Mutual Fund Profile Service I (MFPS I). It was therefore an extension of MFPS I. However, this study suggested a potential move towards a more distributed data collection process.
As more tokenization projects launch, the need for on-chain NAV data is increasing. The PoC involved sending messages from the DTCC infrastructure via Chainlink Cross-Chain Interoperability Protocol (CCIP) to the DTCC Ethereum private blockchain. In this particular case, it did not attempt to send data to other blockchains, but it could have done so. Once on the blockchain, any authorized party can use the data.
Customers could access the data using three methods: an API, a single-fund consumer smart contract, and a bulk consumer smart contract that updates pricing and fee data for a range of funds.
In addition to the ability to access data on-chain, benefits included receiving data in real time and greater automation.
Future use cases of blockchain
The DTCC described the Smart NAV functionality as having “infinite use cases”. Future experimentation could include applying the same model to the dissemination of key reference data. Another could be using workflow automation to rebalance portfolios. This type of workflow has been the subject of a Apollo and JP Morgan trial as part of Project Guardian. And the third future use case could involve expanding the functionality to include data capture by asset managers.
This is not the first time blockchain has been used for these types of use cases. In 2017 Vanguard has partnered with blockchain company Symbiont use DLT to distribute index data. The system has worked for several years and may still be working, however Symbiont went bankrupt at the end of 2022.