Nordic bank SEB and Nasdaq have announced a joint project to test a developed prototype for a mutual fund trading platform based on blockchain technology.
“With the help of a blockchain we can create a faster, simpler, more effective and reliable fund market,” said Göran Fors, acting head of Investor Services at SEB.
All of this “increases productivity, reduces manual work and reduces the risk for errors,” according to Magnus Haglind, SVP & Head of Product Management, Market Technology, Nasdaq, adding that investors will get faster response times from purchases and sales.
The fund markets are seen by SEB and Nasdaq as ripe ground for a blockchain trial, because, in contrast to the equities market, which relies on a Central Securities Depository (CSD), the Swedish fund market lacks a central, primary point for registering holdings.
Using blockchain, the market can replace the costly processes that are normally used to ensure secure trading, including paper-driven processes and follow-up phonecalls. Nasdaq and SEB are using chain.com’s ledger technology.
Peter Branner, head of Investment Management at SEB, commented the bank's ambitions with the trial: “So far we have done a lot in terms of using new technology in areas such as portfolio management. If we can use blockchain technology to modernise the customer transactions it will potentially bring positive knock-on effects to the perceived attractiveness of funds as a savings form.”
Nasdaq’s systems and infrastructure technologies are used in more than 100 countries on six continents; including the main the Nordic stock exchanges. The company has thus far deployed five other blockchain trials around the world, including a proxy-voting blockchain project in Estonia and a a blockchain backed payment solution together with Citi.
Blockchain is a technology that is most famous for enabling the virtual cryptocurrency bitcoin. Its being hailed as a potential disruptor of industries ranging from derivatives and funds clearing all the way to diamond trading and land registries.
If all goes to plan, what happens next?
Haglind (Nasdaq): “We see an opportunity to build a full scale platform. Participants can join as either direct or in-direct participants. We see a future where market participant collaborate on a joint platform and compete on offering the best products and services.”
What are they key challenges to overcome in this trial?
“Collaboration is an important part to it. We strongly encourage and welcome collaboration across the Swedish fund market landscape. The more players, the better -- as this strengthens the quality of the infrastructure and the resiliency of the pilot.”
Why did Nasdaq choose Sweden as its launching pad for blockchain trials?
“One of the company’s main growth businesses, Market Technology, sits in Sweden. So we have some of the best tech minds in the financial world sitting right here in Stockholm. Getting a chance to work on a local project with an innovator like SEB is [a great opportunity]. Sweden encourages experimentation and rethinking how business works, so this project has a lot of possibility.”
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