Distributed Ledger Technology: A Possible Way forward for Securities Clearing
The current system of securities clearing and settlement is dysfunctional, slow, prone to (tax) fraud, and expensive to operate. An alternative system based on distributed ledger technology could eradicate any uncertainty as to who holds a given security and the associated rights at any time. This would allow for much more transparent and efficient clearing and settlement.
A decentralised database (such as a distributed ledger) provides a great deal of transparency for regulatory supervision. It also provides substantial cost savings, as the need for harmonising proprietary databases diminishes.
By applying specific cryptographic methods and selectively adjusting reading rights, sensitive business data in the shared ledger can be protected while being selectively accessible for supervisory authorities.
Consequently, DLT can enable a system of securities trading that is transparent, efficient and much less prone to fraud.
Fiedler, I., Ante, L., Steinmetz, F., & Häseler, S. (2018). Distributed Ledger Technology: A Possible Way Forward for Securities Clearing. Binary District. https://www.blockchainresearchlab.org/wp-content/uploads/2020/05/DLT-Clearing-Binary-District-Journal-4.pdf.
06 Jul 2018
- Ingo Fiedler
- Lennart Ante
- Fred Steinmetz
- Sönke Häseler