Blockchain backers bullish on post-trade impact

Blockchain backers bullish on post-trade impact

A handful of blockchain backers believe the technology will become mainstream across the post-trade industry in a few years.

Around 40 senior executives from a mix of banks, bourses and clearing houses gave the bullish outlook in a recent poll by the Post-Trade Distributed Ledger (PTDL) group. 

The survey follows a report by European securities regulator ESMA last week, which said regulatory action for blockchain technology at this “early stage” is “premature”.

Post-trade services are required to execute the transfer of ownership and cash after a securities trade has been made.

Custody and settlement along with clearing, trade reporting and collateral management services are some of the key functions.

A growing number of market participants believe blockchains - records or ledgers of electronic transactions –  will boost transparency, shortern settlement cycles and cut post-trade costs.

However, fears over adoption and hesitation about embracing what is still a cutting-edge technology remain barriers to growth.

Last week ESMA identified a number of legal and technical challenges that would need to be overcome before blockchain could be applied widely to securities markets.

Some of these challenges are related to the technology itself, such as scalability and interoperability with existing systems.

Other issues include governance framework, privacy and regulatory issues.

Members of PTDL, including State Street, Euroclear, HSBC and the London Stock Exchange, are working with regulators to build up post-trade use cases.

ASX became an early blockchain pioneer when it announced at partnership with Digital Asset at the start of 2016 to trial the technology around equity clearing and settlement.

The Australian bourse is expected to make a decision later this year on whether or not to deploy the distributed ledger platform.

Meanwhile Clearstream recently revealed it has been working with central securities depositories (CSDs) in South Africa, Norway and Canada on a blockchain solution to ease cross-border collateral transactions.