基于区块链的资产交易结算（英文版）.pdf

15:45 19/3/2019 RFS-OP-REVF180125.tex Page: 1716 17161753 Blockchain-Based Settlement for Asset Trading Jonathan Chiu Bank of Canada Thorsten V. Koeppl Queens University Can securities be settled on a blockchain, and, if so, what are the gains relative to existing settlement systems? The main benefit of a blockchain is faster and more flexible settlement, whereas settlement fails need to be ruled out where participants fork the chain to cancel trading losses. With a proof-of-work protocol, the blockchain needs to restrict settlement speed through block size and time in order to generate transaction fees, which finance costly mining. Despite mining being a deadweight cost, our estimates for the U.S. corporate debt market yield net gains from a blockchain in the range of 14 bps. (JEL G20, H40, P43) Received May 31, 2017; editorial decision May 29, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. The principal risk in securities markets is settlement risk, where the seller of a security fails to deliver the security, while receiving payment, or where the buyer of a security fails to deliver payment, while receiving the security. To deal with such risk, modern financial markets rely on securities settlement systems that ensure a delivery versus payment (DvP) mechanism, where the settlement of the cash and the securities leg in a trade are intrinsically linked. These systems are typically organized around a specialized third party called “central securities depository” (CSD), which transfers legal ownerships of securities against payment. Still, many other intermediaries, such as brokers, custodians, and payment agents, are involved in facilitating the clearing and settlement of a trade making the settlement process rather time and cost The views expressed in this paper are not necessarily the views of the Bank of Canada. We thank our discussant, Larry Glosten, the audience at the RFS FinTech conference, two anonymous referees, and the editor for their comments. This research was supported by SSHRC Insight Grant 435-2014-1416. Supplementary data can be found on The Review of Financial Studies Web site. Send correspondence to Thorsten V. Koeppl, Queens University, Dunning Hall, 94 University Avenue, Kingston, ON K7L 3N6, Canada; telephone: (613) 533-2250. E-mail: thorecon.queensu.ca. The Author(s) 2019. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please e-mail: . doi:10.1093/rfs/hhy122 Downloaded from by Renmin University user on 05 December 2019 15:45 19/3/2019 RFS-OP-REVF180125.tex Page: 1717 17161753 Blockchain-Based Settlement intensive 1 . As a consequence, settlement cycles in many fragmented securities markets tend to be fairly long and fixed at particular time intervals, such as T+2, T+3, or, even, longer, to coordinate actions among intermediaries. Many practitioners believe that ablockchain,ordistributedledgertechnology (DLT), has the potential to radically transform securities settlement. The key innovation is to have a shared database of securities ownership that can be updated without relying on multiple, specialized intermediaries or a third-party infrastructure. Settlement risk can be contained by employing smart contracts that are built to provide DvP automatically in the absence of a central authority (see Wall and Malm 2016). The main advantage of blockchain technology is that it can speed settlement, both by getting rid of a fragmented post-trade infrastructure and by implementing a more flexible settlement cycle. Financial market participants often list faster settlement times as a main concern in modern financial markets. 2 The consensus here is that shorter settlement times tend to reduce technical defaults in whicheven with a DvP mechanism in placea trading party gains from a short-term settlement failure on a transaction even though the party could settle the transaction. 3 Moreover, a blockchain could offer the opportunity for market participants to choose how fast a transaction settles, because the length of settlement is important for time-critical transactions. According to FINRA (2017, p.6), “ the adoption of DLT may not necessarily lead to implementation of real-time settlement, but it has the potential to make settlement time more a feature of the actual market needs of the parties instead of being based on operational constraints.” Consequently, using a blockchain for settling securities could allow for flexible settlement times and, in doing so, create value beyond what can be offered by traditional settlement systems. Under which condition is it feasible to settle securities on a blockchain? And what gains are associated with faster and more flexible settlement relative to using the settlement infrastructure that is currently in place? To answer these questions, we build a model of a hypothetical blockchain for securities settlement that has three distinctive features. 4 First, we assume that the blockchain handles ownership transfers of both securities and payments. This enables a DvP mechanism and, thus, the blockchain has the potential to directly rule out settlement risk. Second, we assume that the blockchain is permissionless. No designated third parties are in charge of updating the 1 For example, see the discussion in Benos, Garratt, and Gurrola-Perez (2017). 2 See, for example, the survey of market participants by the Depository Trust and Clearing Corporation (DTCC) (Boston Consulting Group 2012). 3 Fleming and Garbade (2005) describe the occurrence of and reasons for settlement fails in the market for Treasuries. Besides miscommunication or operational problems, fails occur when the short-term cost of settling a trade exceeds the short-term value of settling a trade for a counterparty. Our model, which will be provided below, will capture such incentives. 4 This is important as the goal of this paper is to understand the potential of blockchain technology, rather than to discuss any particular existing blockchain design that has been proposed for securities settlement. 1717 Downloaded from by Renmin University user on 05 December 2019 15:45 19/3/2019 RFS-OP-REVF180125.tex Page: 1718 17161753 The Review of Financial Studies / v 32 n 5 2019 information stored on the blockchain. 5 Third, the design of the blockchain controls the speed of settlement. The block time determines how frequently a batch of securities transactions is being settled, while block size controls the maximum size of each batch. Participants will select how fast they would like to settle by posting transaction fees to have their transactions incorporated into a block. The blockchain in our paper is thus a record-keeping system that keeps track of securities ownership as well as payments related to securities trades. For securities trades to be settled, the transaction information (transfer of ownership and payment) needs to be recorded on the blockchain. To this end, the investors involved in the trade communicate this information to a peer-to-peer network that is charged with updating the blockchain. The updating of records is based on a proof-of-work (PoW) protocol. A group of transaction validators called “miners” is tasked with solving a computationally intensive problem. Whoever solves the problem first obtains a reward and is allowed to update the blockchain. Such competition helps to protect the integrity of the blockchain. After a securities transaction has taken place and been communicated to the network, an investor can still undo it by creating a fork on the chain which is an alternative history of records. If the investor trying to fork in fact wins the competition, he can convince the entire network that the transaction has not been conducted. To avoid such settlement fails, the blockchain system needs to offer large rewards to make the mining competition sufficiently difficult. Here, the key issue is that mining is a public good. Once there is a sufficient amount of mining activities, settlement fails can be prevented independent of the total number of transactions, making settlement a free resource. Hence, blockchain-based settlement systems need to make fast settlement a scarce resource in order for investors to pledge transaction fees that generate rewards for mining. A blockchain can generate fees by limiting the speed at which it is updated. 6 This can be achieved through the design of the blockchain, by restricting the block size (how many transactions can be included in each new record) and the block time (how frequently new records are incorporated). When investors have a desire to settle early, slowing the block time and making blocks smaller creates congestion on the blockchain. Investors are then willing to pay larger transaction fees in order to get into blocks faster and, hence, settle their trades 5 Alternatively, a blockchain could be permissioned in which some trusted parties have been designated to update and manage the information stored. Not surprisingly, this model has been favored by existing financial intermediaries. Some start-ups, however, have worked on a permissionless blockchains, such as CoinSpark or Colu (based on colored coins technology in the Bitcoin network) and Lykke, who is working on an integrated, secure global marketplace for the exchange of different financial assets. 6 An alternative way of generating revenue for the blockchain would be seignorage through issuing additional cryptocurrency for payment. However, a blockchain is likely to rely on tokenized money balances issued by a central bank for settling transactions. Hence, new cryptocurrency creation may not be an option. 1718 Downloaded from by Renmin University user on 05 December 2019 15:45 19/3/2019 RFS-OP-REVF180125.tex Page: 1719 17161753 Blockchain-Based Settlement faster. In essence, congestion makes fast settlement scarce, turning a public good into a club good. Congestion, however, creates two types of costs for investors. First, investors have to pledge transaction fees that have to be sufficiently high to discourage incentives to fork the chain. Second, settlement lags arise as settlement becomes a scarce resource. Thus, the system needs to balance transaction fees and settlement speed, while ensuring that the blockchain is tamper proof. When settlement is too costly or too slow, investors will not choose to conduct a transaction. Hence, the feasibility of a trustless blockchain depends on whether the system can rule out settlement fails in a cost-effective manner. A trustless blockchain tends to be more viable for an asset market with a large volume of small transactions. This insight is again related to the public good character of settling trades on a blockchain. The benefit for revoking a trade is related to the individual transaction size, whereas the cost of doing so depends on the mining reward, which is related to the aggregate transaction volume. Larger trades tend to have larger incentives to cause settlement fails; a larger volume raises the potential for the blockchain to generate mining rewards. In addition, the incentive to fork the chain increases with the trade exposure to post-trade price movements. Thus, assets with lower price risk are more conducive to blockchain-based settlement. Finally, a blockchain is more viable for time-critical transactions because investors are willing to pay a higher fee for timely settlement. This enables the blockchain to raise more mining rewards. The optimal design of a permissionless blockchain chooses a block time and a block size to maximize the expected net trade surplus. We first derive a constraint that summarizes the incentives for any investors not to fork and cause a settlement fail. This constraint becomes tighter as congestion for settlement decreases. Consequently, one cannot set arbitrarily large block sizes to speed settlement. Interestingly, one cannot set an arbitrarily low block time either. A shorter block time implies that the total number of blocks needed to be support settlement over a time interval increases. Total rewards have to be split over more blocks reducing the reward per block and, hence, mining competition. This introduces a trade-off between faster block time and smaller block size. Overall, we show that it is optimal to choose the block time and the block size that jointly minimize the time to settle all transactions over a trade period, while still generating sufficient fees to rule out settlement fails. We then calibrate our model to the U.S. corporate debt market to provide an estimate of the gains from blockchain-based settlement. Assuming that intentional forking incurs a small fixed cost, we find that trades can be settled quite cost effectively on a permissionless blockchain. For a block time of 5 minutes, the optimal block size would optimally lead to a throughput rate of 2.6 transactions per second. This implies an average settlement time of 148 minutes and fees of roughly 0.34 bps per trade. 1719 Downloaded from by Renmin University user on 05 December 2019 15:45 19/3/2019 RFS-OP-REVF180125.tex Page: 1720 17161753 The Review of Financial Studies / v 32 n 5 2019 Interestingly, these results could be improved further by lengthening block time and, simultaneously, increasing block size to satisfy the condition that there are no settlement fails. We find that a block time equal to about 27 minutes is optimal, together with a very large block size. This would be a vast improvement relative to the existing settlement regime which has a settlement cycle of T +2. Using our calibration, we find that the gains from moving to faster settlement fall in the neighborhood of about 1-4 bps: investors would still prefer a permissionless blockchain, even when subsidizing a legacy settlement system by this amount. 7 To the best of our knowledge, our work is the first to explicitly model the distinctive technological features of a blockchain for asset settlement and investigates its feasibility and optimal design both qualitatively and quantitatively. It is still uncertain whether and in which form this technology will be adopted to reform securities settlement systems. For instance, Pinna and Ruttenberg (2016) envisage different potential future scenarios. At one extreme, DLT could be fully implemented via a permissionless blockchain; at the other extreme, the existing core players could simply adopt the database features of a distributed ledger technology to improve internal efficiency, while still relying on known intermediaries to update the database. It is reasonable to conclude that different systems could be adopted for different environments depending on specific factors, such as market structure, participant characteristics, assets, and the regulatory framework.