Finadium: Can the Blockchain Work for Securities Finance, OTC Derivatives and Other Collateralized Transactions?

Finadium has released a new research report on blockchain, a potentially exciting new technology in financial markets. Blockchain promises to be revolutionary, disruptive and a way to fundamentally change financial services. While proponents may be correct about the technologyʼs potential, the buzz can be confusing; how much of the publicity is hype versus reality for collateralized trading markets including securities finance and OTC derivatives? We offer a practical look at how blockchain could be implemented across complex capital market activities including liquidity and capital management.

Finadium has been tracking the industry conversation around blockchain protocols and “bitcoin-like” networks within capital markets with great interest. This paper is first intended to help the reader better understand the practical business concepts involved, and second to suggest how blockchain-based networks and protocols could be effectively applied within the scope of the business processes that are our focus.

This report takes a pragmatic approach, evaluating what applications blockchain might have on silos and/or business processes in collateralized trading markets and why. We address core questions including what is required for a successful open or closed blockchain network in institutional financial markets, what existing problems could be most easily or effectively solved with this new “disruptive” technology, and how could the industry gain value. We also separate out bitcoin vs. blockchain, and explain how they differ and intersect from the perspective of collateralized trading markets.

This report has been written for financial market professionals in trading, treasury, liquidity management, regulatory capital management, clearing, custody, operations and technology. This is a general interest report, which presumes little former exposure to blockchain and the ideas behind it. Our intent is to bring readers up to speed with the main concepts, including public conceptions and misconceptions, then explore potential applications connected to the daily business processes at financial institutions today.

This report is part of the full Finadium research subscription, providing briefings and analysis to the financial markets industry. Finadium full research subscribers can log in to access this report.

For non-subscribers and Finadium Executive Briefing clients, more information on this report and subscription information is available on the Finadium website.

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