Given the potential applications for distributed ledgers in clearing and settlement, blockchain technology is increasingly drawing interest from major stock market operators.
Among the most early and active financial firms exploring the technology have been major US firms including Nasdaq, which has launched its own blockchain-based service for private shares; the New York Stock Exchange (NYSE), which in 2015 invested in bitcoin exchange provider Coinbase; and the Australian Securities Exchange (ASX), which is working with Digital Asset Holdings to develop blockchain solutions.
Less vocal among this group has been Deutsche Börse, operator of the Frankfurt Stock Exchange, the largest in the German market, and a recent investor in Digital Asset’s $60m funding round. Headquartered in Frankfurt Rhein-Main, the group had 4,540 employees at the close of 2014, and received a net revenue of over €2bn in the last financial year.
The move to explore blockchain is perhaps unsurprising given the fact that the German financial giant’s business covers the whole process chain, from securities and derivatives trading, to clearing, settlement and custody.
According to Heiner Seidel, a spokesperson for the group, Deutsche Börse has been interested in blockchains for some time, but is still looking for the best way to approach the technology.
Seidel told CoinDesk:
“Like many other companies, at the beginning we analyzed the potential of bitcoin and quickly realized the relevance of the technology underlying bitcoin.”
In a new interview, Seidel spoke more candidly about the efforts ongoing at Deutsche Börse and its developing thesis on the technology.
Prototypes in development
Intriguingly, Seidel noted the group is already working on multiple proofs of concept for the technology.
“Since early 2015, we have a dedicated project which has been analyzing the market, identified potential use cases and [that] even developed some prototypes,” he said.
Rather than risking focusing on any single use case for the tech, the group is taking a broad view of the possibilities for distributed ledgers across a number of its business lines.
While research and development into blockchain-based systems may be ongoing, providing infrastructure for financial firms places responsibilities on the group and its services in terms of efficiency, security and robustness.
“As operator of critical market infrastructure,” Seidel said, “we have to fulfill certain business requirements to ensure orderly trading and clearing.”
The comments echo findings from Aite Group, which has found that issues with interoperability between existing and legacy systems was likely to be a bigger concern for financial institutions as they move forward with the technology.
Echoing some criticisms that have been directed at bitcoin’s blockchain in recent months, he continued:
“Our IT systems have to be robust, reliable, fast and fail-safe. Topics like latency or scalability are important prerequisites.”
Continued exploration
Going forward, the group has plans to get more deeply involved in the blockchain space, according to Seidel, and will take a “three-dimensional” approach to achieve this aim.
Firstly, the ongoing internal development of software and applications based on the group’s IT expertise as a market operator is set to continue.
He further explained Deutsche Börse intends to participate in industry consortiums and efforts such as the Hyperledger Project, an open-source project to create a blockchain fabric for businesses led by the Linux Foundation.
Formerly known as the Open Ledger Project, the Hyperledger Project was first revealed in December as a cross-industry initiative boasting participants such as Cisco and IBM as well as blockchain industry startups such as Digital Asset and R3CEV. This week, the project announced that it now has 30 members on board.
Finally, as evidenced by the recent investment in Digital Asset, Deutsche Börse is open to acquiring stakes in FinTech startups, stating it will do so “where appropriate and reasonable”.
Pete Rizzo contributed reporting.
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