Ushering in a New Era of Trading with Blockchain

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It’s a new age for financial markets and the traders that are busy facilitating countless trades every day.   New trading markets, combined with high transaction volumes put more pressure on asset managers, brokers, and traders than ever.  With the emergence of new trading markets and a massive amount of trading, asset managers, brokers, traders – everyone involved in trading operations – is under more strain than ever to execute transactions quickly and accurately.

The good news is technology is advancing rapidly and creating opportunities for hedge funds and other investment firms to operate more efficiently, and many solutions are available to improve pre-and post-trade processes.

One underlying technology that has generated a lot of interest, not only in the financial sector, but across business verticals as a whole, is Blockchain, which has the potential to disrupt financial transaction processing by significantly increasing the speed of transactions while adding unprecedented visibility and security. 

In simple terms, blockchain is a series of immutable records of transactions recorded and confirmed by a series of computers not owned by any single organization.  Transactions are stored in blocks, which are linked to one another to create a chain.  Each block contains not only the transaction data, but also a hash – a time-stamp – from the previous block.  The hash creates a system of verification across the entire chain and prevents previously confirmed blocks from change, creating a permanent and unalterable record of every transaction.

Because speed and accuracy is critical to financial services, many firms have expressed interest in exploring how blockchain can revolutionize trading.  In fact, 77% see blockchain as part of their production process by next year – meaning they are likely already working on projects to integrate blockchain into their settlement, reconciliation, and other processes – or are at least developing strategies to do so.

Today’s trades are settled on traditional networks using largely manual processes, which can take days to process through exchanges and clearinghouses that are required to follow complex regulatory requirements.  Because these rules and regulations can all be written into blockchain transactions, recording trades on blockchain networks could drop the processing time to as little as a few minutes, while also increasing the accuracy of transactions and reporting.  The transparent nature of blockchain would eliminate much of the reconciliation that has to happen to match transactions by traders.  The result will be real-time settlement and reconciliation with complete transparency, accuracy, and security that eliminates much of the manual work currently required by traders.

By automating post-trade actions, streamlining manual work, increasing security and compliance of transactions, and reducing settlement time, blockchain will not only allow traders to work more efficiency, but can reduce trading costs, reduce risk, and increase liquidity.  A few financial institutions are already leveraging blockchain for trade processing and reconciliation, but as more and more firms implement their strategies, the financial markets can expect a new era of trading.




Edited by Erik Linask
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Group Editorial Director

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