Blockchain may have yet to fulfil its promise but progress, albeit slowly, is being made in the post trade space since the publication and discussion two years ago of Ascendant Strategy’s Insights Paper: ‘Time for a reality check – how close is the blockchain revolution in capital markets?’
One of the main differences today is that there are more initiatives and proof of concepts in the market. There are still the unicorn start-ups but also brokerages, custodians, institutional trading platforms and global banks are building a range of digital asset products and services across the capital markets spectrum, according to a new White Paper published by Invesco along with Keith Bear and Michel Rauchs, Fellow and Research Affiliate respectively at Cambridge Judge Business School’s Centre for Alternative Finance.
Equally as important, market participants have a more realistic view of the potential of distributed technology ledger (DLT) capabilities. It is no longer seen as revolutionary, ushering in a new age and replacing outdated post trade functions across the board. Instead, it is widely accepted that adopting the technology is an evolutionary process that will bring incremental step changes and improvements to existing market infrastructure within an organisation. In other words, the projects are more geared towards specific areas with high levels of manual processes that can deliver the greatest efficiencies. They are also likely to co-exist and not replace the existing systems. Moving the dial to fixing the problems of the larger market infrastructure providers such as central securities depositories and central counterparties needs widescale collaboration and cooperation, which is never easy in financial services especially on the banking side.
However, if the smaller scale projects and proof of concepts are successful, this is likely to grab market participants’ attention and may encourage them to sit productively around a table.
Lynn Strongin Dodds of The Realization Group goes back to the original participants – James Maxfield and Alastair Rutherford, Managing Directors at Ascendant Strategy, Olaf Ransome, Head of CS at the Swiss Digital Exchange, which is part of SIX Group, Sophia Grami, CSO of CrypPro, and Monica Summerville, Head of Capital Markets, Celent, a division of the Oliver Wyman Group – for a progress report as to where DLT fits in the post trade ecosystem and what the future will hold.