Blockchain vendor update (Premium Content)

Following publication of our September 2015 research report, “Can the Blockchain Work for Securities Finance, OTC Derivatives and Other Collateralized Transactions?“, we have continued to track vendor activities in this space. This article offers an update on four blockchain vendor moves and press releases that have occurred in the last two weeks with a focus on the securities and investments space.

More banks invest in R3

September 29, 2015 – Financial innovation firm R3 today announced that an additional 13 of the world’s leading banks have joined its partnership to design and apply distributed ledger technologies to global financial markets. The news comes two weeks after R3 and nine initial member banks publicly announced the formation of their distributed ledger initiative.

This addition, which takes the total number of banks collaborating on the project to 22, includes Bank of America, Bank of New York Mellon, Mitsubishi UFJ Financial Group, Citi, Commerzbank, Deutsche Bank, HSBC, Morgan Stanley, National Australia Bank, Royal Bank of Canada, SEB, Societe Generale and Toronto-Dominion Bank.

These institutions will join Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, J.P. Morgan, Royal Bank of Scotland, State Street and UBS in developing commercial applications for this emerging technology in the global financial services industry. The project will also seek to establish consistent standards and protocols for the technology in order to facilitate broader adoption and gain a network effect.

Winklevoss twins get NY License for bitcoin exchange

October 5, 2015 – Gemini Trust Co., the Bitcoin exchange founded by Cameron and Tyler Winklevoss, has been granted a banking charter by the New York Department of Financial services. The company is the highest-profile virtual-currency firm to receive a charter since the New York regulator issued a public order in March 2014 requiring certain virtual-currency exchanges to apply for such clearance. “We didn’t apply for a BitLicense because we wanted to build an exchange that both Main Street and Wall Street could use and trust, so we decided to obtain a limited liability trust company charter in order to do so,” said Tyler Winklevoss, chief executive officer of Gemini, in a company statement. The first charter was granted to itBit Trust Co. in May. In June, the regulator published its final rules outlining which virtual-currency companies must apply to the regulator for a so-called BitLicense allowing them to operate in New York state. It approved the first BitLicense, which involves a less stringent review process than does a charter, in September.

Nomura investigates distributed ledgers; Fidelity joins Irish blockchain hackathon

October 5, 2015 (Finextra) – Nomura Securities is to investigate the use of distributed ledger technology in a joint project with IT supplier and consultancy The Nomura Research Institute. NRI says it will kick off the project in collaboration with the Japanese securities house and a number of unidentified startups later this month. The results will be used to examine opportunities for practical application after the study is completed in January 2016, says the firm. “Financial and technology sectors are becoming increasingly linked,” says the IT house in a brief statement. “The unique value created by the merger of existing business with advanced technologies and services provided by new ventures, such as blockchain, is a large area of interest for the financial services industry in Japan and worldwide.

Separately, Fidelity Investments has thrown its weight behind a blockchain hackathon in Dublin organised by local consultancy Chainsmiths. The event, which aims to put Ireland on the map as a global centre for research into the application of blockchain technologies in financial services has attracted 150 participants who will be battling it out for EUR10,000 in prize money.

SETL breaks through 1 billion transactions per day on blockchain
SETL, the institutional payment and settlement infrastructure based on blockchain technology, has today announced that it has established a test network which has broken the 1 billion transactions-per-day capacity barrier for blockchain movements.

SETL also gave more detail of its technology strategy, revealing it had developed novel techniques, to allow it to process transactions in a parallel and effectively remove practical constraints on volume. Anthony Culligan, the SETL CEO, stated, “We are determined to stay on the front foot in technology development and will continue to incorporate the best techniques in our developments. We have a laser focus on financial services “. Culligan further added, “We are not running on a third party platform or powered by an off-the-shelf technology. We develop at the source code level to give us absolute control over how we can deliver our service. Less than 0.5% of our current codebase is licenced technology. This announcement demonstrates the benefits of the approach.”

FIX has set up a blockchain working group. The FIX Trading Community has set up a Working Group to focus on the use of digital currency and blockchain initiatives in the capital markets industry.The core focus of the group is to identify, analyse and define use cases and integration points for digital currency and distributed ledger technologies, and recommend best practices for FIX implementation and usage of this emerging technology in financial markets.

While not a vendor update, BNPP Securities Services noted that people were turned away at the blockchain session at SIBOS yesterday due to overcrowding.

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