Seven Financial Institutions Complete Proof of Concept of Blockchain Platform
Seven financial institutions, including Alliance Bernstein, Citi, Credit Suisse and HSBC, have completed a multi-month proof-of-concept aimed at assessing the merits of blockchain to simplify reference data processes.
The group, working with fintech startups R3 and Axoni through the Securities Industry and Financial Markets Association (SIFMA), sought to use blockchain technology to enhance risk management, cost and efficiency issues related to managing financial reference data.
Reference data are counterparty and security identifiers used when making a trade. They are used to complete financial transactions and settle those transactions.
“This project demonstrates distributed ledger technology’s value in financial markets beyond commonly-discussed use cases such as trade settlement and cash movement,” Thomas Chippas, COO of Axoni, said in a media release.
“A reliable, distributed, synchronized reference data store will eliminate vast amounts of expensive, replicated infrastructure and workflows across industry participants.”
The prototype used Axoni Core, Axoni’s proprietary distributed ledger software, and demonstrated the potential application of distributed ledger technology to provide the capability for regulators and network participants to track in real-time which parties on the ledger have created, issued and proposed amendments to the data record. It also enabled automated data distribution across all participants, as well as provided a model to manage conflicting data.
Credit Suisse, which coordinated the collaborative initiative, believes that using blockchain and distributed ledger technology as a shared reference data backbone for the industry can help reduce duplicate reference data costs and improve data latency, ultimately leading to lowered costs and reduced operational risks.
“Our vision is to demonstrate how distributed ledgers applicability can go beyond settlement,” Emmanuel Aidoo, who heads the Distributed Ledger and Blockchain effort at Credit Suisse, said.
A number of incumbents and fintech startups have been collaborating on several different reference data projects. For instance, SWIFT’s Global Payments Innovation Initiative is working on some proof-of-concepts projects involving blockchain technology, including a reference database for OTC marketplaces.
Based in New York City, Axoni is a capital markets technology company specializing in distributed ledger applications.
In April, Axoni completed the trial of a blockchain and smart contracts platform to manage post-trade lifecycle events for standard North American single name credit default swaps (CDS).
The initiative involved the development of a blockchain trade processing network across a blend of hosted and locally-installed deployments of Axoni software.
The project included participation of Bank of America Merrill Lynch, Citi, Credit Suisse, JP Morgan, the Depository Trust & Clearing Corporation (DTCC) and Markit.