Global exchange group Intercontinental Exchange (ICE) and tokenisation infrastructure provider tZERO Group have executed a Memorandum of Understanding (MOU) related to set of agreements to support tokenised public securities markets. Under the MOU, tZERO will be a “premier design partner” for ICE’s NYSE unit with respect to its planned tokenised securities platform (aka Digital Trading Platform, or DTP). Specifically, tZERO will consult on the platform’s digital transfer agent and broker-dealer infrastructure for on-chain settlement of tokenised securities. Relatedly, ICE has increased its equity investment in tZERO and will license its substantial portfolio of blockchain-related patents.
“tZERO’s experience in regulated on-chain infrastructure makes them a valuable partner as we expand our upcoming digital transfer agent program in support of tokenised securities trading and settlement,” says Michael Blaugrund, VP, Strategic Initiatives, ICE.
Under the MOU, ICE plans to work with tZERO to establish standards for digital transfer agents, tokenisation agents and broker-dealers integrating with the DTP. For its part, tZERO, in which ICE first invested in 2022, already operates a transfer agent (tZERO Transfer Services) regulated by the US Securities & Exchange Commission (SEC). As such, it maintains cap tables for companies and processes corporate actions. Also, tZERO operates multiple regulated broker/dealer units – including tZERO Securities and tZERO Digital Asset Securities – that between them provide Alternative Trading System (ATS) secondary market trading for tokenised assets, as well as institutional-grade custody, clearance, and settlement for digital assets.
Given its deep experience across several digital asset businesses, tZERO expects it will become an approved digital transfer agent on the DTP when it goes live. The collaboration will also evaluate use of tZERO tokenised assets for collateral management functions across ICE’s clearing houses.
“We are thrilled to be partnering with ICE for the NYSE-affiliated digital transfer agent program,” says Alan Konevsky, Chairman and Chief Executive Officer of tZERO. “We have spent years building an end-to-end regulated platform for tokenised securities and related IP. Partnering with ICE to expand our breadth and reach to public equities is a natural step forward for our infrastructure-as-a-service offering and more broadly for tokenised markets. We are grateful to ICE, thank them for their support and look forward to deepening the relationship.”
In relation to ICE’s increased investment in tZERO – terms of which are not being disclosed – ICE will eceive a license to leverage tZERO’s blockchain patent portfolio, which encompasses 23 patent families and 103 patents. Patents cover key aspects of the lifecycle of tokenised securities, including compliance-aware transfer logic, upgradeable smart-contract frameworks, scalable corporate-action handling and broker-dealer-level identity.
One key patent relates to supporting and managing compliance for transfers of tokenised securities – even when hosted within wallets on decentralised, permissionless DLT networks. Using tZERO’s patented architecture, requests to transfer a token between wallets cause the smart contract code within it to determine whether the transfer is permitted in relation to wallet ownership, jurisdiction and permissions. If the destination wallet is not approved, the transfer fails.
Notably, tZERO has recently taken steps to protect the IP inherent in its patents, including by formally charging that its rival Securitize – which the NYSE also works with – has infringed them, a claim that Securitize denies. While the disagreement between tZERO and Securitize is currently the subject of litigation in a Delaware patent court, since ICE has licensed tZERO’s patents it should be able to sidestep any operational impacts regardless of the outcome of the case.
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