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White Paper

Blockchain Technology – Transforming Transaction Processing in Capital Markets

By Raghavasuresh Samudrala, Banking and Financial Services, TCS

 

 

Based on the success of blockchain technology in storing and transferring value in the form of virtual currencies, a popular view in the financial services industry is that it can also help manage transactions in mainstream financial assets more effectively. The industry is looking to re-engineer the blockchain technology from virtual currency implementations like bitcoin, and tailor it to store and transfer value in assets like regulated currencies, financial instruments, and derivative contracts.


Transforming Transaction Processing Using Blockchain Technology

A business transaction is considered successful when financial messages are successfully exchanged between institutions, and all necessary ledgers are updated in the books of all participating institutions. Blockchain technology enables financial institutions to build a shared flat ledger that can be managed by trusted processing nodes. The shared ledger may need to be encrypted to protect confidentiality of the data, according to the needs of the various financial intermediaries and their customers. Key business processes like security issuance, trading, clearing and settlement can be redesigned and simplified using such a solution. 

Building Blocks for a Blockchain-based Industry Solution

Ideal for reducing time and operational costs, a blockchain-based industry solution needs some key building blocks other than technology 

  • Blockchain technology
  • Industry ecosystem
  • Business applications
  • Governance 

Together, these layers will form a robust solution that will drive operational efficacy and efficiency of the capital markets industry. 

Conclusion

Blockchain technology has the potential to provide a real-time, cost-effective, and secure settlement model that is global and decentralized. It significantly redefines the roles of market players like exchanges, CSDs, CCPs, and custodians. Implementation of this technology in the capital markets transaction processing space holds the promise to reinvent the industry, enabling organizations to focus on strategic revenue generating products and services, while ensuring reduced systemic risk.