Exchanges experiment with blockchain technology
Security, lower costs and time savings could boost competitiveness
TOKYO -- The world's securities exchanges are increasingly harnessing blockchain to stay competitive against each other and keep up with new technologies changing the infrastructure of the financial industry.
Blockchain's distributed ledger can share and record information with individual devices throughout a network while ensuring that there are no discrepancies between transactions. The technology is more secure against cyberattacks and inexpensive in comparison to centrally managed systems like stock exchanges.
The Nasdaq market in the U.S. recently invested in French blockchain startup Stratumn, which develops authentication technology, and set up a stock exchange for unlisted companies incorporating blockchain technology in 2015. Going forward, the Nasdaq will accelerate technology development through joint research with emerging companies, said Ulf Carlsson, general manager of North Asia and Japan.
The Australian Securities Exchange, meanwhile, is considering introducing blockchain to next-generation clearing and settlement systems. It will issue a decision by year's end.
The Japan Exchange Group set up a laboratory to experiment with stock issuances, trading and settlements through blockchain technology. Participating companies rose from 23 to 32 as the end of March. The lab will work with affiliates such as the Japan Securities Clearing Corporation to optimize the group's internal operations.
Currently in the financial industry, a central authority manages and verifies all transactions when exchanging securities or changing title, a process that takes time. If blockchain technology took over these tasks, it would reduce system construction costs and shorten settlement times, translating to big savings for investors as well.
Moves by stock exchanges to boost their competitiveness by reorganizing on an international basis have been dashed by politics. Deutsche Boerse CEO Carsten Kengeter said at a meeting in June that his company will make small acquisitions in the financial technology industry, after a merger with the London Stock Exchange fell apart following a European Union veto.
The birth of alternative fundraising methods that do not require exchanges -- such as crowdfunding and the issuance virtual currencies -- is one reason for the rush to develop new technologies. Emerging players offering these new services are attracting customers because of their low costs and speed. "We need to provide useful services by learning from emerging companies and optimizing our own systems," said Atsushi Santo, head of the Japan Exchange Group's fintech lab.