Finadium conducted a survey of funding professionals on the practical adoption of distributed ledger technology (DLT) for repo trading, post-trade processing and data management. This project aims to help identify how market infrastructure providers from both the public sector and industry-supported entities can help individual firms make the leap, transforming DLT from a nice-to-have future technology into a tool as ubiquitous as email.
If most proponents of DLT were on one side of a fence and funding and financing market practitioners were on the other, the two would share common views of the sky but see the scenery around them in very different ways. The first group may highlight the great potential of data flowing seamlessly through financial markets, with minimized risk, elimination of trade fails and a reduction in the manual elements of what makes markets work. The other sees a moat of legacy architecture, budgetary pressures, a lack of product cohesion and a deep concern about what could get lost in the process of digitalization. The view of the sky is a uniting force and everyone can see a future, however near or distant, in which DLT improves markets for everyone. But while the fence has some holes in it for each side to peer through, it remains fairly tall and wide.
This report asks the question, what can be done to remove the fence and deliver to both groups not just a common view of their surroundings but also solutions that proponents believe in and that desk professionals can actually adopt and use in a short time frame. Right now, even the language used by both sides can feel foreign to the other. A leap must be made in terms of demonstrating value and ease of use before regulated entities can reliably adopt DLT solutions with the confidence of better outcomes at an economic scale that matters.
To help bridge this gap, Finadium conducted a survey of funding professionals to learn, for example, what value (if any) desk professionals saw in DLT for tokenized securities, how far they had gotten towards adoption and their views towards current efforts from market infrastructure providers. We concluded each survey by generating ideas about what infrastructure can do to help generate DLT engagement.
There is a tipping point when enough firms start to adopt DLT that it becomes the industry standard. We take the position that DLT, especially for post-trade, would deliver benefits. Our question is: where is that tipping point and what can financial market infrastructures do to help the market get there for the common good and for their own benefits as well?
This report should be read by any market infrastructure provider and professional in the funding and financing markets.
A direct link to the report for Finadium research clients is here
For non-subscribers, more information is available here.