Blockchain Potential for Markets Grabs Exchange CEOs' Attention

  • Industry would be `complete fools' to ignore blockchain
  • Technology behind bitcoin would speed clearing, settlement

Executives in the $30 trillion futures industry would like to send a message to the blockchain community: we get it.

The chief executive officers of the world’s largest futures markets agreed at a conference in Chicago that the software innovations that power the digital bitcoin or similar uses related to so-called distributed ledgers to remake markets are advancements they’re taking seriously. Wall Street banks, exchanges and Silicon Valley-based startups are racing to show that a decentralized approach to clearing and settlement can cut the time and risk involved in loan, bond and derivatives markets.

The potential that has attracted exchange leaders and Wall Street interest is how blockchain could simplify the process of tracking ownership and accelerating the transfer of assets from one market participant to another. To work, the banks, hedge funds and asset managers that comprise the main players in a given financial market need to use the same network.

“It’s going to be transformational if we can make it work,” including the hurdle of scaling blockchain to the vast size of many financial markets, Phuphinder Gill, chief executive officer of CME Group Inc., the world’s largest futures market, said during a panel discussion at the Futures Industry Association’s annual conference in Chicago. “We’re all looking at it, we’re all working to get to a solution for our client base.”

So far, blockchain startups have attracted about $1 billion in investment capital, comparable to the Internet in its earliest days, said Andreas Preuss, CEO of Eurex, one of Europe’s largest futures markets.

“We would be complete fools if we didn’t think of blockchain developments as something that could be an absolute disruptive agent of change,” he said. “I take it very seriously.”

Startups include R3, headed by former ICAP executive David Rutter, which has agreements with 25 of the world’s largest banks to work together to develop blockchain applications, and Digital Asset Holdings, run by former JPMorgan Chase & Co. banker Blythe Masters. Other firms investigating finance-related uses of blockchain include Symbiont, itBit, Nasdaq Inc., Ripple Labs, Chain, and the New York Stock Exchange, a unit of Intercontinental Exchange Inc.

This is the year that the finance industry wakes up to blockchain, said Jeff Sprecher, CEO of ICE There will be challenges, he said, after a previous presentation at the conference had pointed out the several different ways a single credit swap contract is referred to across the industry.

“What the blockchain is actually doing is causing a dialogue about common standards,” he said.

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