Nasdaq and Partners Complete Blockchain-based Proof-of-Concept for Securities Markets
A group of financial services sector companies, including American stock exchange Nasdaq and a division of Dutch bank ABN AMRO, announced having completed a blockchain-based proof-of-concept for streamlining securities processing when covering margin calls. The project could provide a new application of distributed ledger technology (DLT) in securities markets.
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Settlement of Collateral, Simplified
The project addressed inefficiencies in collateral processing, which have been exacerbated due to recent market changes such as extended trading hours and requirements from European Market Infrastructure Regulation to centrally clear derivatives traded over the counter. In addition to ABN AMRO Clearing and Nasdaq, participants also included Belgian financial company Euroclear and EuroCCP, a European equities clearing services firm. Tata Consultancy Services advised ABN AMRO during the project.
Julia Haglind, CEO of Nasdaq Clearing, said:
“As both a leading market technology provider and a CCP operator, Nasdaq is uniquely positioned to bring efficiencies to collateral management. We believe that blockchain technology brings with it a huge potential to transform markets everywhere, and this project is an excellent showcase of this.”
Nasdaq developed the proof-of-concept for the network, while ABN AMRO Clearing, EuroCCP, and Nasdaq Clearing developed the front-end and managed integration into their own environments.
The system uses a network that is shared between collateral givers, collateral takers, and intermediaries. Parties were able to handle the margin call, the securities collateral delivery, and the return process within minutes, while clearing participants and central counterparties were able to optimize their collateral positions through a collateral dashboard.
More Blockchain Investment From the Finance Sector
The news comes in the context of increasing interest in blockchain and DLT in the financial services industry. A recent report from market intelligence firm Greenwich Associates said that investment by the financial services industry in blockchain increased by 67 percent in 2017 year-on-year.
Nasdaq has been an active player in experimenting with blockchain technology and cryptocurrencies. The company said in April that it was considering becoming a cryptocurrency exchange, with CEO Adena Friedman saying she believed that digital currencies had staying power. American crypto exchange Gemini also recently said they were planning to use Nasdaq SMARTS technology to monitor trading on their platform.
ABN AMRO has also participated in multiple blockchain projects. The bank was involved in a blockchain commodities transaction system along with commodities trader Louis Dreyfus and European banks ING and Société Générale earlier this year. They also took part in an energy trading platform with oil companies BP, Shell, Statoil, and the same two banks. Back in 2016, the company announced a pilot DLT project for commercial real estate in partnership with IBM.
What’s your take? Are banks and financial service providers going to continue entering the blockchain and cryptocurrency industries?
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