Tokenized ETF
DLT fund structures backed by tokenized collateral
Roles and Responsibilities
ETF Manager – Defines fund parameters, publishes PCF, oversees index alignment.
Custodian / CSD – Holds legal title to underlying assets; provides verified balance data.
Authorized Participants (APs) – Deliver PCF baskets and receive creation units.
Regulators / Auditors – Observe and validate onchain records through permissioned access.
Canton Network – Provides synchronized ledger, privacy, and settlement guarantees.
ETF Lifecycle
The high-level technical architecture of Denote can be summarized as follows:
ETF Initialization: The ETF Manager creates an ETF on Canton, with the identifier, custodian, and reference index.
PCF Publication: The ETF Manager publishes a Portfolio Composition File (PCF) on a recurring basis (e.g., daily). This PCF defines the underlying assets required to issue a standard Creation Unit (typically 50,000 shares) or vice versa for redemption.
Custodial Deposit by APs: An Authorized Participant deposits the required TradFi assets (equities, bonds), to a regulated custodian. This custodian then issues tokenized collateral. These assets can be used with other Canton Applications such as trading venues.
Onchain Creation via DvD: the AP transfers the assets that match PCF requirements to the ETF contract. ETF shares are issued in return. This transaction is settled atomically via Delivery-versus-Delivery (DvD). This operation is also done in reverse to redeem ETF shares.
Optional Public-Chain Distribution: Once issued, ETF shares could optionally be bridged to a public blockchain for distribution, trading, or interaction with stablecoins or public-chain liquidity.
Guarantees
Atomic DvD eliminates settlement risk.
Auditability – Full transaction visibility for regulators
Secure Custody - underlying assets remain with the regulated custodians
Possible Extensions
Automated rebalancing workflows
Onchain collateralized lending against ETF units
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