Euroclear Sees Seven Steps to Bring Blockchain to Capital Markets

Post-trade settlement specialist Euroclear has co-authored a new report on how blockchain and distributed ledger technology can be adapted for capital markets.

Written with management consulting firm Oliver Wyman, the report takes a positive stance on the technology, arguing it could eliminate delays and inefficiencies in capital markets. The publication follows news that Euroclear is working with its peers, including CME Group and the London Stock Exchange, on a consortium for post-trade settlement.

Overall, the report recommends the industry take seven steps to realize the technology, including working on proof-of-concepts, collaborating with industry peers and "preparing a narrative" for regulators and supervisory bodies that may interested in the implications of such investigations.

As with previous reports, Euroclear echoed the growing consensus that collaboration is needed to realize the full potential of the nascent technology.

In statements, Angus Scott, the firm’s head of product strategy and innovation, said:

"In order to work together to shape a new future, the industry needs to take a collective view on the potential of the technology, which was the intention of this study. The market must embrace this potential, show patience with this development and invest in various innovative solutions to bring it to reality."

The report also notably identified areas where blockchain technology would be able to cut costs for capital markets participants, such as through the decommissioning of redundant systems, increasing cost-sharing across institutions and by cutting counterparty credit risk.

The report further could that high-frequency trading could see a "substantial slowdown" should the technology validate ownership before an asset is sold.

However, the report continued to stress that market participants will need to work together to realize this future and overcome hurdles including scalability and a lack of regulatory clarity.

For more information, read the full report.

Settlement image via Shutterstuck