ICAP’s post-trade risk and information (PTRI) division has completed a proof-of-technology test case for a distributed ledger using blockchain technology.
The test used the multi-asset messaging and matching network, Harmony, and New York blockchain infrastructure provider Axoni, creating a private peer-to-peer distributed ledger network using smart contracts.
Matched messages from bilaterally executed foreign exchange spot trades were imported from the Harmony network and converted into blockchain-based smart contracts. These contracts were distributed to nine representative participant nodes on the network.
The network proved to provide automation for the full complex lifecycle. It offered privacy in transactions, sufficient processing power to support high volumes, and allowed for automated reporting.
According to ICAP, the test showed that blockchain has the potential to provide a common source of user transaction and reference data across assets. This could improve the accuracy of data and allow updated copies of the data to be stored locally, while code messages can allow information to be seen only by the intended participant.
The technology could mean reduced operational risk and improved reconciliation and operations processes, leading to significant back-office and technology savings.
Jenny Knott, CEO of ICAP’s PTRI services division, said: “In successfully completing a proof of technology test, ICAP has demonstrated one of the first real world applications of distributed ledger technology that has the ability to significantly transform the post trade landscape.”
“Realising the value of ICAP’s unique portfolio of PTRI businesses and investee companies, we have combined our expertise, networks and technology with Axoni’s distributed ledger technology to push the boundaries of post trade innovation.”
Greg Schvey, CEO of Axoni, added: “There’s no shortage of demand for distributed ledger projects. ICAP’s thoughtful consideration of where this technology can be most valuable, its ambitious deployment objectives, and market-leading client reach offer a high probability of success when combined with Axoni’s advanced blockchain infrastructure.”
ICAP has also expanded its PTRI services for the Markets in Financial Instruments Directives (MiFID) II and Regulation (MiFIR), offering a broader range of products to meet new cross-asset reporting and processing obligations.
The new solutions will build on requirements under the Dodd-Frank Act, the European Markets Infrastructure Regulation and other global regulations. They will include provision of trade certainty for venue-executed trades, trade and reporting services and global central counterparty connectivity for over-the-counter executed trades.
Knott said: "ICAP is once again at the forefront of innovation with agnostic connectivity and the ability to support market participants in meeting their regulatory clearing, publication and reporting obligations in an accurate, efficient and flexible manner.”
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