The Impact & Potential Of Blockchain On The Securities Transaction Lifecycle

Thursday, 01 October 2015
By Now&ZYen

There is considerable interest in the potential use of ‘blockchain’ in the settlement of securities transactions. Proponents argue that the use of cryptographic security tools to create blockchains (sequential, digitally signed and validated records of ownership) can allow almost instantaneous post-trade delivery against payment (DVP), thus radically simplifying post-trade processing and substantially reducing both costs and operational and liquidity risks. The SWIFT Institute has commissioned Professor Michael Mainelli & Professor Alistair Milne, Loughborough University School of Business and Economics, to examine the impact and potential of blockchains and mutual distributed ledgers on the lifecycle of securities transactions.

Our research is investigating three hypotheses. First, that decentralisation can be achieved through other schemes more efficient than 'bitcoin mining'. Second, that decentralisation will lead to substantial shifts in the functions and organisation of the post-trade landscape. Third, that the adoption of blockchain in securities settlement will require a co-ordinated and widespread change in operational processes, and will not be achievable through piecemeal efforts. These three hypotheses are being explored using a combination of desk-based analysis, focus groups and structured interviews. We held a workshop on 29 September examining “Mutual Distributed Ledgers versus The Blockchain”. We intend to hold a second workshop in November. We are also drawing upon active research at Long Finance, particularly Distributed Futures. Our target for completion is February 2016. We welcome interested parties contacting us for discussion - please email Michael Mainelli.