Paxos Pushes Blockchain for Stock Trade Clearing Approval
Published Date: 8/6/2025
Notice
Summary
Paxos Securities Settlement Company wants to become an official clearing agency to help settle and clear securities trades using a cool, secure digital ledger. This change affects investors and financial firms by potentially speeding up and securing how trades are finalized. The SEC is now asking for public comments before deciding, so keep an eye out for deadlines and possible fees.
Analyzed Economic Effects
9 provisions identified: 2 benefits, 3 costs, 4 mixed.
New Clearing Agency Application Filed
Paxos Securities Settlement Company (PSSC) filed an application on Form CA-1 on July 14, 2025 to register as a clearing agency to provide central securities depository (CSD) and settlement services using a private, permissioned distributed ledger. The SEC is soliciting public comments on the Application through September 22, 2025 before deciding whether to grant registration.
Minimum Margin Deposit Requirement ($10,000)
PSSC's proposed rules would require a "minimum required margin deposit" (MRMD) of $10,000 for participants, and that MRMD may be increased based on other factors in the rules. Participants must meet this MRMD as part of PSSC's required margin amount calculations.
Daily and Intraday Margin Payment Deadlines
PSSC would notify participants of their required margin amount (RMA) at least once daily by 10:00 p.m. on trade date (or in some cases by 11:59 p.m.), and participants must satisfy the RMA by 10:00 a.m. the following day. PSSC would also communicate intraday computed margin requirement (CMR) charges as soon as practicable, and participants must satisfy intraday charges within two hours of notice.
Participant Eligibility Tied to DTC and Entity Types
PSSC would make services available only to Depository Trust Company (DTC) participants that meet PSSC's participant qualifications, which include entity types such as registered broker-dealers, certain bank and trust companies, registered clearing agencies, insurance companies, and registered investment companies. PSSC has not yet applied to become a participant in DTC.
Bilateral Netting, Not a Central Counterparty
PSSC would not operate as a central counterparty (CCP). Settlements submitted to PSSC would be settled on a net basis between counterparty pairs (CP Pairs) unless both participants in a CP Pair request gross settlement in writing. PSSC also would offer an option for "enhanced netting" across CP Pairs.
Digitized Securities and Cash with Rapid-Transfer Rule
PSSC would require participants to deposit eligible securities into PSSC's DTC account, then create a security entitlement on the Paxos Ledger credited to the participant's account. PSSC would not remove a security entitlement without also transferring the underlying security in "rapid succession." PSSC would do a similar "cash digitization" process for cash held in omnibus operating or margin cash accounts.
Proposed Fees and Public Comment Period
PSSC included proposed rules and proposed fees as attachments to its Application (Exhibit E and Exhibit E.37). The SEC will post the Application and accept public comments, which must be submitted by September 22, 2025.
Governance and Addition of Participant Directors
PSSC's Board would have ten directors, including three member directors, five public directors, and two participant directors to be added to the Board within 180 calendar days after PSSC commences operations and has at least two participants. The Board would also have five board-level committees and a Participant Advisory Committee (PAC).
Cloud Services Will Support Core Clearing Systems
PSSC intends to use a cloud services provider under a service agreement to support core clearing services such as trade capture, pre-settlement processing, margin, settlement, and custody of security entitlements.
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