A group of industry giants, from areas such as exchanges, banks and trading services firms, have come together to explore the ways in which blockchain technology may be able to revolutionize methods of clearing, settling and reporting securities trades. They join other companies, such as NASDAQ, who seek to take advantage of the multitude of opportunities provided by the innovative technology.
The firms involved in the discussion are UBS, the London Stock Exchange, LCH.Clearnet, Societe Generale, CME group and Euroclear. Using the name ‘Post Trade Distributed Ledger Working Group’, they are interested in investigating how post-trade processes can be run with blockchain technology, replacing complex systems currently used in securities trading. It is believed that, by using code on a blockchain rather than traditional methods, stock trades could be settled and cleared in a few minutes – significantly shorter than the current couple of days.
So far there have been three meetings of the group, with the London Stock Exchange hosting the first. Blockchain technology’s potential to revolutionize the industry has been noted by the company. Speaking to Financial News, a spokesperson from the London Stock Exchange said:
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. We believe that driving innovation and developing new products using this exciting new technology will significantly reduce risk and margin requirements while delivering the opportunity for deeper regulatory oversight.
Societe Generale and UBS are also among 25 banks that have partnered with blockchain technology firm R3 to develop blockchain standards for banking and financial markets.