Securities Trading with Blockchain

[jklondon]

I am in fintech space responsible for platforms that trade bonds. I am starting to consider how blockchain technology can be used to facilitate the transfer of securities aspect from a buyer to seller.

Here is the business scenario (expressed simply):

1. Buyer meets Seller through an electronic platform. This is not as trivial as hitting a price on a screen as is the case in Equity or FX markets. There are number of Request-For-Quote, Order Based and Crossing systems that are designed to generate a trade between two parties whilst attempting to minimize the information leakage to the wider market in the process.

2. For this scenario I am assuming buyer has found a seller without a broker intermediary through a crossing platform. Each party to the trade doesn't know the other party is i.e. it is totally anonymous. The crossing platform in my scenario has two functions. Firstly it enables each party to find the other and agree on the trade details. Secondly it is responsible for ensuring the security is transferred between two parties on the terms agreed to. The secondary aspect can be referred to as 'clearing'.

3. Both parties have to trust the platform and the platform in return has to trust the parties. It is possible for a party to sell something which they don't have (this is called shorting). In that case the platform has to 'make good' on the trade to the buyer who is expecting delivery of the bond. The process to do this is complicated and costly to the platform.

Given the very brief description above I am interested in initial thoughts on how  Blockchain technology in general could result in a 'better' platform to facilitate the trade. I would qualify better as one satisfying the following:

- Ensuring that the buyer can trust the seller has the bond prior to the trade being agreed.
- Facilitate non-reputable trust between everyone involved i.e. the parties and the platform.

In essence if this is somehow possible the clearing aspect of the platform can be collapsed this leading to monetary savings for each party involved.

Keen on thoughts / questions to help progress this.

JK

[orx]

Hi JK,

you absolutely right ... there is something to do in this market
I'm currently writing a white paper on that subject -issuing end of month

there are many aspects at exchanging bonds between two parties, agreeing on the terms is one, trusting the counterparty is two, but also, how the issue will find the buyer's back at the time of income/coupon payments, etc

send me your contact details by priv message and i'll forward you the white paper in couple fo weeks
cheers
O.