Trade processing was historically an inefficient process that involved sending documents between firms via fax and Telex, and manual re-keying of data as it passed from one proprietary trading system to another.
Then, in 1991, a group of financial industry leaders and competitors created an advanced standard electronic message format with which to trade mortgage securities. That format is now known as straight-through processing (STP) and the group that created it still exists as the International Securities Association for Institutional Trade Communication (ISITC).
The association continues to work to promote operational efficiency in the global securities trading industry, and boasts hundreds of companies from around the globe as members, including BNY Mellon, Goldman Sachs and Wells Fargo.
Technology never sits still, however, and once again a new disruptor has arrived that promises to bring further improvements to securities trading – blockchains, also called distributed ledgers.
“Today Blockchain is potentially a new paradigm requiring initially an educational angle for operational and technical teams across the ISITC Membership,” Nigel Solkhon, CEO of the association’s European arm, told CoinDesk.
Solkhon, who is also director, regional product head of execution 2 custody for Citi in London, added:
“The nature of the new technology, the interest from participants and the introduction of new players will create a new landscape for ISITC Europe members to adapt to.”
While ISITC believes that blockchain is in its infancy in the securities market, it is accelerating extremely fast, according to Solkhon.
“Should you reflect back to the early 2000s, this was also the challenge perceived for the introduction of the Internet and how long it took for companies and models to be defined and become successful,” he said.
He pointed to the “enormous” amount of investment in research and development of blockchain, adding that, though the evolution of the technology may not be not clear today, it will likely become visible in the next 12-18 months.
Technology neutral
With blockchains being such a new technology, Solkhon framed ISITC Europe’s early role as an educator that will facilitate communication between regulators, partner forums and experts.
To that end, he said that the association had already funded London Metropolitan University as an association member – creating a “pilot link” between the securities industry and academia.
As the level of awareness of the technology, infrastructure and regulatory guidance matures, Solkhon predicted, ISITC Europe will move further into examining at the impact of the resulting technology shift on standards and the supply and value chain, as well as the integration of today’s “complex industry modus operandi”.
On whether or not blockchain technology is a good thing for the securities industry, he explained that the vendor- and member-neutral association is unlikely to propose one technical solution over another, adding:
“I believe that by the end of Q2 we will have a better view of the challenges and changes faced by each of the industry segments.”
Advocating and making predictions are not the aim, though. From an ISITC perspective as an industry forum, the key hope is that the industry will collaborate and define a common solution, he said.
Last week, ISITC Europe held its inaugural meeting on blockchain technology in London. At the event, a new blockchain working group was created and a commitment made to collaborate with other groups engaged in discussions on the technology – specifically when related to operational and technical definitions.
For now, ISITC Europe plans to adapt to the new financial work on several levels represented by other new working groups covering regulation, technology and industry players.
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