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Stock Exchange

The London Stock Exchange Group (LSEG) is collaborating with IBM to develop a securities data blockchain solution for European SMEs. The project plans to digitize securities certificate data to simplify issuance and management of shareholding information. If delivered the solution aims to create a shared registry of shareholder transaction records.

LSEG is testing the use of blockchain technology in a financial business network where data segregation and confidentiality is vital. By working with IBM, a pioneer in building enterprise-class blockchain solutions, we are committed to building, testing and scaling our capabilities in emerging technologies over time,” said Chris Corrado, Group COO and CIO, London Stock Exchange Group.

Chris Corrado, COO, LSEG (https://www.linkedin.com/in/cfcorrado/)
Chris Corrado, COO, LSEG

 

The securities data blockchain detail

Borsa Italiana is part of LSEG. With IBM it is building a blockchain solution to digitize the issuance of securities for small and medium enterprises (SMEs) in Europe.

The objective is to simplify the tracking and management of shareholding information. The new system will create a distributed shared registry containing a record of all shareholder transactions. This should help open up new opportunities for trading and investing.

They will replace the paper trading certificates commonly issued to private companies today. With a digitized, streamlined and transparent process enabled by blockchain technology, the various parties – including issuers, regulators and investors – will have increased insight into company information.

Traditionally, private SMEs lack access to public stock exchange networks or formalized credit structures. With this solution, SMEs in Europe should be able to:

  • improve their access credit
  • link into a broader and more mature investor ecosystem
  • set up new trading networks
  • obtain funding.

 

All this can occur when there is sharing financial data in a security-rich and transparent public arena.

Through our work with IBM on this blockchain solution, Borsa Italiana is taking the lead in transforming the way European SMEs can manage their shareholder data and at the same time expand credit access – all on a trusted digital platform,” said Raffaele Jerusalmi, CEO, Borsa Italiana.

Built on Hyperledger

The solution uses Hyperledger Fabric version 1.0, a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation. The system Bolsa Italiana and IBM have designed:

  • ensures highly sensitive securities data is shareable amongst permissioned network participants
  • remains secure and ‘gated’.

 

This blockchain solution exploits highly secure infrastructure technology. It uses the best levels of encryption commercially available (up to Evaluation Assurance Level 5). It will interoperate with LSEG’s existing systems, promoting efficiency and business continuity.

An initial test phase is currently underway. It involves a small group of partners and clients.

What does it mean?

This is an instance where SMEs, who are rarely the focus of blockchain initiatives, may benefit. The aspiration is that blockchain technology will aid SMEs’ ability access to financing and enable shareholder data exchanges.

As Marie Wieck, general manager, IBM Blockchain, puts it: “Sharing secure and transparent critical network data across shareholder networks is difficult using traditional system, Blockchain is poised to help remove some of these barriers in traditional methods for the transfer of value – much as the Internet did for the exchange of information in the late 1990s.”

It sounds good. Of that there is little doubt. The challenge, however, lies in whether adopting blockchain technologies will change behaviour patterns of a class of organisation (SMEs) which are noted for their independence. This is one of the great unknowns:

  • if proven correct there will be good reason to believe other change-instances will occur
  • if not, too much may be being expected of blockchain (and maybe a middle of the road approach, like that of the InterLedger Protocol, will be more relevant).
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Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.

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