Nasdaq to step up blockchain trialsNasdaq, the US exchanges operator, this year plans to increase the number of trials with the decentralised network that underpins bitcoin.
The New York group expects to debut three or four trials of the ledger in trade processing in the next 12 months, in a move that Bob Greifeld, the group’s chief executive, hopes could radically reshape some of the US’s sometimes cumbersome and slow-moving market plumbing.
This month Nasdaq announced it would test the blockchain ledger with its venue for trading shares in private companies, making it the first high-profile exchange to say it was exploring the use of the blockchain in financial markets.
Mr Greifeld told the FT he wanted Nasdaq to be “a leader in the field”. He added the network could potentially revolutionise the time it took to finalise deals on US securities markets from a maximum of three days — known in the industry as “T+3”.
As a public, distributed ledger, the blockchain acts as a central repository for details of all bitcoin trades, though it could also be used for other financial assets.
Bitcoin and other cryptocurrency transactions are validated based on a mathematical formula running on the computers of volunteers, allowing assets to be transferred without using a centralised agency such as a bank or a clearing house.
“I am a big believer in the ability of blockchain technology to effect fundamental change in the infrastructure of the financial services industry. Clearing houses are a wonderful invention, but if you have a public ledger that is trusted, you can evolve back to a bilateral (trading) world but proceed with instantaneous settlement. We currently settle at T+3. Why not settle in 5-10 minutes?”
Shortening settlement times for trading could reduce the risk that counterparties would not be paid, while also cutting the amount of collateral, or insurance, used to back trades.
However, it could also mean investors may be required to pay for some trades far earlier than they have become accustomed to.
For the Nasdaq Private Market, using blockchain means transforming the recording of transactions from paper certificates and spreadsheets to an audited record of the lineage of ownership of private securities.
Although Nasdaq is exploring its use in post-trade services, other groups are also turning their attention to bitcoin and its technology. Nasdaq’s rival, the New York Stock Exchange, this month said it would launch the first exchange-calculated and distributed bitcoin index. In January, NYSE made a minority investment in Coinbase, a bitcoin wallet and platform.
Blythe Masters, the former JPMorgan banker who helped develop the idea behind credit default swaps, has joined a group of trading executives setting up a venue that will convert buyers and sellers of financial assets into bitcoins, thus cutting settlement times.
Source: http://www.ft.com/intl/cms/s/0/81b6145c-0309-11e5-b31d-00144feabdc0.html
