Strate, South Africa’s central securities depository (CSD), plans to launch an e-proxy voting system based on blockchain technology in 2017.

The body, responsible for clearing and settling all transactions that take place on the Johannesburg Stock Exchange (JSE), has partnered with Russia’s National Settlement Depository (NSD) to develop and test systems aimed at simplifying shareholder voting.

“While the system works, the process right now is extremely manual. Votes that are sent by mail have to be physically counted by various participants in the market and are then added to the votes cast at Annual General Meetings. Blockchain can automate the entire process and make it far more efficient and transparent,” said Tanya Knowles, executive director of fractal solutions at Strate.

Knowles said the decision to partner with NSD, taken at the Sibos Conference in Geneva last month, is rooted in the fact that both CSDs have conducted independent proof of concept studies and are at a similar stage in understanding and developing an appropriate voting solution.

The NSD was also one of the first financial organisations in the world to announce that the development of a blockchain-based prototype for e-proxy voting. Through the partnership, both Strate and the NSD will explore mutually beneficial solutions and share the developmental costs of the technology.

The two CSDs are to issue a joint request for proposals (RFPs) to blockchain vendors early next year. Strate and NSD will split the cost of purchasing a system with basic functionalities and will each pay to customise certain features for their home markets, she said.

Should other CSDs – a number of whom have expressed interest in joining the project – come on-board, they will also be responsible for a portion of the cost.

Both CSDs plan to launch the e-proxy voting system next year, as such they are looking to partner with an international service provider whose product is around 70% to 80% complete.

In South Africa, the planned e-proxy voting system will be rolled out on a client-by-client basis, with an eventual goal to have the entire market take up the system, Knowles said.

She added that issuers of shares on the JSE and market participants have already indicated that proxy voting is a “pain area” and would be open to using digital solutions.

Strate’s partnership with NSD will be the first use case e-proxy voting system geared toward shareholders and will form the basis for industry-wide collaboration.

Knowles said that 15 CSDs from developing and emerging markets, including Strate and NSD, have agreed to form a consortium to explore blockchain and DLT technology in a post-trading environment.

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