Instant, or “T+0” settlement of trades would reduce risks and costs, and free up liquidity. But capital markets today remain stuck with legacy “T+2” settlements, moving too slowly to reduce that to T+1. United Kingdom fintech firm Tokenovate has created a solution called the Novat protocol, a real-time system ready to provide legal finality for settlement within existing regulatory frameworks.
Waiting an extra day or two for final settlement on trades is a problem that costs the financial industry billions. There’s exposure risk, capital charges, and extra operational costs from end-of-day “batching cycles,” needing to fix trade breaks, and reconciling records manually.
Novat would integrate into existing trading systems “very easily, and by design,” Tokenovate CEO Richard Baker told CoinGeek.
“In today’s T+2, or even T+1 world, money and assets sit idle for hours or days while trades settle. That ‘trapped liquidity’ forces firms to keep billions locked up in margin, collateral, and buffers, just in case something fails. With Novat’s T+0 (instant) settlement, that wait time disappears.”
“T+X” refers to the initial trade plus however many days it takes to settle finally and legally. However, any delays are simply unnecessary with the technology available today. Tokenovate’s modeling shows that moving from T+2 settlements to T+0 could cut exposure by 60-80%. This would release nine-figure sums of capital that otherwise sit idle in unsettled trades.
Tokenizing the settlement, not the asset
The Novat protocol comes from Tokenovate’s work with International Swaps and Derivatives Association (ISDA) and Fintech Open Source Foundation (FINOS), and the result is a “CDM-based automation engine transforms market standards into executable logic, enabling settlement to occur deterministically and transparently.”
For all the technical details, Tokenovate has a white paper on Novat available here.
Novat is unlike other asset tokenization solutions we’ve heard about. That is, it doesn’t tokenize the asset, but rather the act of settlement itself. It’s based on the FINOS Common Domain Model (CDM), which is the financial industry’s shared data standard covering financial products and events. It aligns trade data, legal contracts, and settlement workflows by creating a single-use digital token that is then “burned” once it completes the task. Trades are atomic and legally enforceable, using processes that are automated and transparent.
Tokens exist in transaction data recorded on a UTXO-based blockchain, in this case, the BSV blockchain (although the potential exists for it to run on other similar blockchain networks where necessary to prevent more fragmentation).
What’s important to note is that Novat offers a legally enforceable synchronization layer for asset trades, not just a parallel infrastructure. This is not a case of “rip and replace” (i.e., needing to completely remove the old system before replacing it with another). Novat works within current legal, operational, and regulatory frameworks, plugging into existing trade, custody, and payment systems through APIs.
The expression “synchronization layer” means it aligns the data, the logic, and the legal record across the fragmented systems being used today.
Capital markets today are slowly making the transition from T+2 to T+1 settlements, which are due by 2027. Tokenovate says it’s possible to eliminate delays all together, with minimal disruption.
“Novat doesn’t replace existing systems but rather connects to them,” Baker added. “It’s built on the CDM open standard, which many major financial institutions recognise and use in their post-trade workflows. That means firms don’t have to rebuild their infrastructure or abandon custodians.”
“Novat integrates easily: it’s compatible, not disruptive. And its T+0 speed directly converts into freed liquidity, lower risk, and measurable savings.”
Tokenovate expects that Novat’s combination of speed, familiar data standards, and full interoperability with existing systems will make it an attractive option for everyone in the world’s capital markets. Digital networks have been making markets ever-faster for generations now, but they need to remain as secure and trustworthy as the physical procedures of the past. Far from the usual blockchain/digital hype about “disruption,” Novat’s promise to capital markets is not to disrupt anything at all.
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Source: https://coingeek.com/tokenovate-novat-unlocks-trapped-liquidity-with-t0-trades/