The chief executive of the Wall Street clearing house, set to transfer to Blockchain technology, has spoken of how the future of Wall Street could be very different.
Quoted by the local press, Michael C. Bodson stated that the collaborative project with IBM to replace a back end database with “Blockchain-inspired” software would be running by 2018.
Proving Blockchain’s power
The project is being created for use by the Depository Trust & Clearing Corporation (DTCC), which handles the reporting of practically all stock and trade moves in the US. It also records the trading of valuable derivatives.
“The project will prove to the industry that [Blockchain] is a powerful technology that can deliver benefits,” Bodson told Reuters.
Being wholly engineered by legacy financial institutions, there is nonetheless coyness on the topic of introducing any decentralized concepts to Wall Street organs.
The familiar talk of so-called “distributed ledger” technology - a favorite euphemism of bank-based finance employing Blockchain in a centralized manner - is still present, for example.
Bodson described such an implementation, which will be used by the DTCC, as “one version of the truth that everyone shares and everyone utilizes.”
“This is a real tangible step into what could be a very different future for Wall Street,” he added.
Nonetheless, the move represents perhaps the biggest step yet for the US and global financial powerhouse regarding the embracement of new ways of conducting business. The DTCC, for example, had around $11 trillion of default credit swaps pass under its jurisdiction in 2016, equal to roughly 80 percent of the entire global volume. Its success will be closely eyed by replica institutions around the world.
It is, of course, no shot in the dark - a test in 2016 yielded such positive results that the full-scale implementation was then set in motion.
“The test showed that distributed ledger technology could handle all the various types of events processing needs for credit default swaps and it showed that it could be done at a lower cost point than what can be done with our existing infrastructure.”
The test was run in partnership with Axoni, a dedicated startup providing Blockchain solutions for the financial industry. R3 Consortium expertise was also on hand, with Managing Director Charley Cooper describing the DTCC’s attitude as “indicative of the broad felt sense in the financial community that this technology is here to stay.”
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