Broadridge has conducted the first proof of concept of a blockchain-based proxy vote in Japan.
Alongside ICJ, a joint venture company of Broadridge and the Tokyo Stock Exchange, the proxy vote took place using Quorum as the underlying distributed ledger technology (DLT).
Developed specifically for the Japanese proxy market, the solution mirrored the voting processes which included unique file transfer protocols on the ICJ electronic platform.
Broadridge stated a blockchain-based solution is ideally suited to streamlining and automating complex reconciliation processes amongst numerous players in the custody chain as exist in the Japanese proxy market.
“The Japan project validated our view on how an interoperable blockchain platform can play a central role in raising corporate governance by creating end-to-end vote transparency and driving operational efficiency in light of the unique processing requirements in Japan,” said Patricia Rosch, president of investor communication solutions, International, Broadridge.
The validation was performed in a test environment in which the role of local custodians, global custodians, the central securities depository and local transfer agents were simulated.
The final positions were loaded onto the ledger and reconciliation was performed using smart contracts. The results demonstrated that if position management is performed on a ledger for proxy voting, it can be used as the single source of truth for data reference needs.
ICJ-participating issuers represent 87% of the TSE First Section market cap, 97% of Nikkei 225 index constituents and 84% of Japan Exchange Group (JPX)-Nikkei Index 400 constituents.
“The PoC is a first step to deploying and utilising this new technology, and we will continue to pursue a path in enhancing the efficiency and transparency of the voting process in Japan, which involves a variety of domestic and global market players, ” said Shigeo Imakiire, president, ICJ.
Several firms are looking at technologies such as blockchain and machine learning to automate and digitise corporate actions. BNP Paribas Securities Services and HSBC are among a number of custody banks testing the use of blockchain technology for proxy voting and corporate event announcements.
Broadridge had also attained a US patent to develop a blockchain-based solution for proxy voting, and has agreed to collaborate with banks including JP Morgan, Northern Trust and Santander to use the technology to enhance global proxy vote transparency and analytics.