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Testing the Waters: Blockchain Technology is Edging into the Exchange Space

By now, the hype surrounding digital ledger technology has subsided into reality. The reality, however, is that initial blockchain-based solutions are on the way.

The hysteria that blockchain was going to be the big disruptor that puts clearinghouses out of business is essentially over. What is sprouting up instead are some interesting projects that are much more targeted at markets and sectors that beg for technological advancement.

At the IOMA: WFE Conference in Frankfurt, Anton Govor, managing director and head of strategy for Moscow Exchange Group said the exchange has developed a working digital ledger-based proxy voting product. It is also looking at utilizing the technology for custodial banking transfers of Russian securities using blockchain.

Ashwin Kumar, global head of product development, Deutsche Boerse, said they too have been working on a proxy voting tool. The exchange is also working on various prototypes that integrate the ecosystem of the central banking system, banks and end users. The exchange is currently researching new ways commercial banks can use the clearing house as well as cross border collateral management with Toronto, Norway and South Africa.

Meanwhile, Paul Symons, head of government relations at Euroclear, noted that its Euroclear Paxos entity is due to launch its blockchain-based gold bullion settlement service later this year. He also noted that Euroclear is looking at how smart contracts can improve internal processes for customers using blockchain, and ways that small and medium sized enterprises can raise capital more quickly and cheaply.

In most cases, these are not game changers for the industry. But they are smaller examples of how exchanges and other participants are trying out the new technology. From there, firms will learn the limitations and the potential for this technology.

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Kharouf is CEO of John J. Lothian & Co. and editor-in-chief of John Lothian News (JLN). He edits the John Lothian Newsletter, MarketsWiki and MarketsReformWiki.