Eight Financial Services Test Blockchain-Powered Equity Swaps

Companies led by JPMorgan Chase & Co and Barclays Bank have achieved the test of an equity swaps post-trade transaction using blockchain technology and smart contracts. The blockchain-powered post-trade prototype was built by Financial Technology Firm Axoni. The other participating institutions are Credit Suisse, Citigroup Inc, financial data and technology provides Thomson Reuters Corp and IHS Markit, as well as business consulting firm Capco. Blockchain technology powers the cryptocurrency bitcoin and enables data-sharing across a network of individual computers. It has gained worldwide popularity because of its usefulness in recording and keeping track of assets across practically all businesses. Smart contracts, on the other hand, are self-executing transaction agreements.

Greg Schvey, Axoni chief executive, said the blockchain-enabled post-trade processing system could translate into substantial cost savings for the financial companies involved in the transaction. The parties run a node that connects them with others on the network. The modern processing of equity swaps could be inconvenient and time-consuming, with each individual dealer having its own internal systems and a single trade going through several such systems. Given the complex nature of equity swaps, trades often break down because of the countless layers of processing a transaction goes through before it ended. What happens now is that with this technology, the parties to the transaction, by virtue of the way blockchains work, are both co-processing and simultaneously running the same code, updating the state of that contracts over time, such that it removes the room for misalignment.

The pilot project started in June. In early September, the members administered a various set of 133 structured test cases to assess the capabilities of blockchain technology.

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