Radicalizing the Equity Market Landscape through NEM Blockchain Technology
This press release appeared on April 11th 2017 at NemFlash.com
Radicalizing the equity market landscape is a thought-provoking challenge to regulators and the equity market in adopting a paradigm shift in the way securities are being traded. It calls for a complete overhaul of the markets and introduces the use of a centralized multi-ledger system, yet operating in a decentralized blockchain network architecture.
The system and solution proposed in this 26-page paper calls for a complete dematerialization of assets, using the NEM blockchain technology. It also calls for disintermediation and re-intermediation of the equity market ecosystem.
The equity market, and the securities industry at large, is an industry that uses a multitude of ledgers to keep record of all transactions. The key challenge that leads to its inefficiencies is the need to reconcile all of these transactions among all the ledgers, and eventually, the payment and settlement process.
The paper is an extension of a proven process that is being utilised by cryptocurrency exchanges. However, hitherto, it has not been applied to long standing traditional markets. The traditional markets are a multi-trillion dollar industry, and as the saying goes, “If it ain’t broke, don’t fix it.” However, there is increased pressure to improve on the settlement period of 3 days. The current scenario is too difficult to change without completely changing the processes.
This paper explains in depth how it can be taken to the extreme using the NEM blockchain technology. It further explains how high-frequency trades and volumes can be easily catered for, using the NEM technology.
The revolutionary approach includes taking broking firms, custodians, and share registrars out of the equation. CSDs role may have to change as well to include being the operator of the blockchain solution in addition to being a trustee of funds deposited.
The disposition of the paper suggests a transformation process that could break the age old tradition that have been in existent for the longest time.
Abstract of the paper published by Lon Wong, CEO of Dragonfly Fintech Pte. Ltd. & President of the NEM.io Foundation Ltd.:
“The equity market poses a very inefficient system when it comes to post-trade clearing, payment and settlement.
Trade matching occurs at the rate of hundreds of transactions per second but clearing and settlement of stock takes more than two days to complete. The equity market should consider a complete system revamp as the current systems and practice methods are based on legacy process practices that are outdated. We present the NEM blockchain technology as a suitable core component to re-design the equity market ecosystem which could save the industry billions of dollars a year in operational expenses. Our recommended approach looks at a clean sheet design taking
cognizance of existing regulatory requirements and the need to shorten the post-trade clearing, payment and settlement cycle. This paper is intentionally written to address a wide spectrum of readers and does not contain deep dive technical details and design.”
About NEM
NEM is an innovative blockchain technology project, a peer-to-peer crypto platform. It is written in Java and JavaScript with 100% original source code. NEM has a stated goal of a wide distribution model and has introduced new features in blockchain technology in its proof-of-importance (POI) algorithm. NEM also features an integrated P2P secure and encrypted messaging system, multisignature accounts and the Eigentrust++ node reputation system.
NEM has gone through extensive open alpha testing starting June 25, 2014, followed by lengthy and comprehensive beta testing starting on October 20, 2014. NEM’s public blockchain launched on March 31, 2015, and is now running without interruptions for almost two years. The private chain project “mijin” is powered by NEM technology.
Today, NEM is undergoing development of an upgraded core technology called “Catapult”. Catapult will power mijin in the first phase and become implemented into the NEM public chain subsequently during 2017.
