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Blockchain could potentially transform capital market structure

Kareyst Lin | Sept. 9, 2016
However, organisations need to resolve short and long-term technical issues first.

Distributed ledger technology, which is also known as blockchain, has the potential to transform capital market structure by encouraging new business development, improving operation efficiency, and contributing to cost reduction.

This is based on the outcomes of proof of concept (PoC) trials with the member firms of Japan Exchange Group (JPX) over the course of the past year, according to FinExtra

JPX has conducted two separate trial runs of distributed ledger technology with Nomura Research Institute (NRI) and technology company IBM this year.

With NRI, JPX worked with Nomura, SBI Securities, and Mitsubishi UFJ Financial Group, and blockchain specialist Currency Port. They investigated the use of Ethereum to decentralise information and resist data tampering when managing stockholders' accounts.

They later ran tests of the technology in low volume markets in conjunction with IBM, using the framework provided by the Hyperledger Project.

"We have tested whether a streamlined process on securities market, securities issuance, trading, settlement, clearing, and ownership registry, could be realised in a distributed ledger technology environment," JPX told FinExtra.  

JPX is confident that distributed ledger technologies have the potential to "rebuild the financial business models that exist today."

However, it also pointed to a number of short and long-term technical issues that need to be resolved. These include non-determinism in executing smart contracts, data privacy control, and throughput capacity and high volume markets. 


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