28 Feb Corporate Bond Settlement
Corporate Bond Settlement
Australian Bond Exchange
Individuals and SMSFs
Corporate bonds currently settle on a T+2 basis.
Enable faster settlement using CBDC, which will improve the efficiency of the corporate bond market.
Risk free settlement asset available to retail investors.
Corporate bonds currently settle on a T+2 basis. CBDC used as a settlement asset could improve the efficiency of the corporate bond market by reducing settlement times, reducing counterparty risk and enabling atomic settlement of transactions.
The pilot demonstrated the use of pilot CBDC at the following points in the lifecycle of a corporate bond:
- Purchase. Bonds held by ABE were sold to investors in exchange for pilot CBDC.
- Coupon payments. ABE made coupon payments to investors in pilot CBDC.
- Sale. At the end of the pilot, investors sold the bond to ABE in exchange for pilot CBDC.
A small number of existing ABE clients were selected to participate in the pilot. ABE acted as principal and sold corporate bonds to clients at the start of the pilot and bought the bonds from the clients at the end of the pilot. The clients did not trade the bonds with each other. Pilot CBDC was used as a risk free settlement asset to enable faster settlement (T+0) of corporate bonds.