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Account Hierarchy

Copyright (c) 2022, ASX Operations Pty Ltd. All rights reserved.
SPDX-License-Identifier: Apache-2.0

Introduction

Custodial services are commonly used throughout the financial services industry. Investors entrust a custodian with their assets for safekeeping, arrangement of transaction settlement, and management of regulatory and tax requirements. Being an industry with a long history, custodial services are often built on legacy systems. A further complexity is that a custodian may also make use of sub-custodians for management of certain assets. Custodians use separate back office systems, adding the burden of reconciliation between organisations. This poses a significant risk for custodians when transactions are performed across different custodians or sub-custodians. Another consequence is the difficulty for custodians to adapt their legacy systems to offer services in new asset classes, such as cryptocurrencies and digitial assets.

Distributed Ledger Technology (DLT) and the Digital Asset Modelling Language (Daml) offer a solution to the problems posed by existing legacy custodian infrastructure. By storing a register of legal and beneficial ownership on a distributed ledger, a single source of truth can be made available to custodians, eliminating the need for reconciliation. Daml as a smart contract language can run on the ledger to enforce the rights and obligations of custodians and beneficial owners. Unique to Daml is its ability to control the privacy of information at a granular level which is vital to preserving the privacy of custodians and their customers.

Project objectives

This project is an example of how to model custodial account hierarchies in Daml and is not intended for production applications. It currently has a dependency on a pre-release version of the Daml Finance library. For more up to date information on modelling account hierarchies in Daml, please refer to the Daml Finance documentation.

The codebase was developed through research and development at Synfini. It provides a a generic Daml library to model a register of assets, enabling multi-party workflows between custodians. It extends the existing FinLib library to support multi-level account hierarchies. The core Daml model currently contains the following components:

  • Relationships between custodians/benefciaries and encoding of the account hierarchy tree (Synfini.AccountHierarchy.Custody module)
  • Allocation of assets to beneficiaries in the hieararchy (Synfini.AccountHierarchy.Allocation module)
  • Asset transfers and Delivery versus Payment transactions (Synfini.AccountHierarchy.Trade module)
  • Processing of corporate actions and other asset lifecycling events (Synfini.AccountHierarchy.Lifecycle module)

In addition, the triggers project contains the following:

  • Automated processing of allocation changes to beneficiaries (Synfini.Trigger.AccountHierarchy.Allocation module)

How to use this project

Please note: DAML SDK 1.17.1 must be installed prior to running the following steps.

Firstly, clone the project including submodules:

git clone https://github.com/SynfiniDLT/account-hierarchy.git --recurse-submodules

Build FinLib, which is a dependency of this project:

daml build --project-root lib-finance/model

Then build the core models:

daml build --project-root core-model/main

There is also a triggers module which can be used for automation of workflows, which can be built using:

daml build --project-root core-trigger/main

Documentation

Please use the example code to understand the structure of the Daml model and how to use the templates. For each example, there is an accompanying diagram found here. The public APIs are documented using doc-comments in the Daml source code.

Project structure

The project is divided into multiple sub-module directories. Sub-module directories ending with "model" contain the workflows (i.e. templates to be uploaded to the ledger), whereas those ending with "trigger" are for automation of these workflows using Daml triggers. The core account hierarchy templates are defined under core-model, while the automation for these templates is in core-trigger. New sub-modules may be developed in future to cater for specific use-cases. Examples could include proxy voting capability with proxy-model and proxy-trigger sub-modules. The project is open to input on new sub-modules from the community.