Several prominent exchanges, trading firms and banks have come together to set up a blockchain-based settlement group that could significantly transition the current securities market in the way of settling securities trades.
A group comprising of the London Stock Exchange, UBS, the CME Group, Societe Generale, LCH.Clearnet and Euroclear have formed an initiative to look into the possibilities of bringing blockchain technology to securities trading.
As reported by the Financial News, sources familiar with the group have confirmed three meetings that have already taken place in recent months. A steering committee has also been formed to help with the process, the publication added.
The group is currently operating under the working title ‘Post Trade Distributed Ledger Working Group,’ with the focus currently on the application of blockchain technology in supporting post-trade processes.
A London Stock Exchange spokesman told Financial News:
Our view is the technology needs to be developed in a considered and rigorous manner, in partnership with clients, to provide the right service and benefit to them. Given our long experience in post-trade, our group has significant technical expertise to bring to the discussion.
The London Stock Exchange Group also played host to the first meeting, while the spokesman shared the company’s belief in seeing blockchain technology to usher change in the capital markets industry. More specifically in both “pre- and post-trade,” with risk management seen to benefit immediately due to the tamper-proof system that blockchain brings.
The current clearing mechanism, which may soon turn into a legacy system if blockchain had its way sees stock trades take two days to be settled during a transfer. A blockchain settlement system is likely to facilitate trades in a matter of minutes.
Although a similar system has already found its legs with the world’s biggest banks backing R3 -- a blockchain initiative that recently counted up to 25 banks and financial institutions across different continents -- sources close to the newly formed group see a contrast. The new group has a wider cache of members and isn’t a commercial venture, the source noted. R3 on the other hand is being backed by the likes of JPMorgan, Barclays, Royal Bank of Scotland, Citibank Group among several other massive banks and corporations.
There is a significant increase in Blockchain initiatives and endeavors for financial applications lately. Nasdaq recently launched Linq, a private blockchain trading platform for private companies. Computing giant Microsoft also announced a blockchain platform powered by Ethereum last week that will specifically help financial institutions with tools to experiment with blockchain technology in an inexpensive way.
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Last modified (UTC): May 5, 2016 2:14 PM