The Depository Trust and Clearing Corporation (DTCC) has recently published a whitepaper “Governing DLT Networks.” The purpose is to unravel a Distributed Ledger Technology (DLT) governance operating model, which is capacitated to manage the risks and consequences of an emerging DLT landscape. This would provide a DLT network entrusted with safety for the greater good of all the participants and the soundness of the network would allow it to reach its maximum potential. Accenture has also been working in collaboration with DTCC in developing a similar governance model that would manage the risks and consequences of a DLT landscape and therefore, has also contributed to the whitepaper.
DLT is a kind of digital system that records transactions of assets in which the details of such transactions are recorded but not stored in multiple places simultaneously. This is what distinguishes them from traditional databases as they do not have a central data store for administration functionality. Ledgers are records of these transactions and another similar type of data which have originally existed in paper form, but, have now gone digital with the growth of information technology. Today this record can be maintained with the help of cryptography, advanced algorithm, and other technology.
DTCC is one of the most significant post-trade market infrastructures for the global financial services and financial technology industries, which has facilities, data centers and offices operating in nearly 16 countries. DTCC automates, centralizes and standardizes the way financial transactions are processed, simultaneously reducing risks, enhancing transparency and infusing efficiency for several dealers, custodian banks and asset managers. Accenture, on the other hand is one of the premier global professional services company that offers a wide range of services and solutions in consulting, strategy, digital technology, and operations.
DLT has already attained attention worldwide as it carries the potential to modernize and improve corporate and enterprise operations. The paper that has been brought out in collaboration talks about a model that will possibly address the responsibilities and functions involved in the operation and maintenance of a DLT platform. Functions here would also include a governing function that would make decisions influencing activity, software changes, contractual agreements, and transaction finality for all the users across the network. Robert Palatnick, Chief Technology Architect, DTCC, said: “The financial services industry has seen unprecedented growth in data processing power over the last 50 years. Distributed Ledger Technology with its built-in consistency, security, and privacy, holds great promise to transform the digital landscape, but DLT’s full potential will only be realized with the implementation of a strong and transparent growing model.”
The eight major functional areas of the DLT Governance Model outlined in the paper are-
1) Governance, which would provide certain roles of the DLT network community like control oversight, strategic decision making with some outlined areas of responsibility, like Steering Committee, Functional Working Group, Change Committee and so on.
2) Participant Lifestyle
3) Runtime operations
4) Third-Party management
7) Legal and finance
8) New concepts introduced by data governance
The Governance model is a very crucial aspect of DTCC’s Trade Information Warehouse initiative, which primarily serves to move an already existing industry-wise central ledger for Credit Default Swaps (CDS) from a legacy mainframe database to a DLT platform leveraging cloud.