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Blockchain empowers cross-border securities transactions

Anuradha Shukla | March 9, 2016
Shortens processing time from three days to same-day settlement.

Blockchain technology is shortening the processing time for cross-border securities transactions, from the current three days to same-day settlement.

To this end, Mizuho Bank, Ltd., Fujitsu Limited, and Fujitsu Laboratories have jointly conducted an operational trial using blockchain technology.

Blockchain technology leverages multiple computers that are connected to a network share and mutually confirm information such as exchange records.

These companies will combine Mizuho Bank's expertise in post-trade processes with the expertise of Fujitsu and Fujitsu Laboratories in designing and building payment systems, as well as in applied blockchain technology.

Their synergies will create an exceptionally convenient financial system that cuts down the risks associated with cross-border securities transactions, such as price fluctuations.

Complexity of transactions

The process for cross-border securities transactions are usually complex and typically it takes three days from trade execution to final settlement.

Concerned parties seek to shorten the settlement process as the asset manager is exposed to such risks as price fluctuations if the counterparty goes bankrupt during the period between executing the trade and completion of the settlement.

Shortening the time period is not easy due to issues such as the large cost of system operations management that make the initiative impractical.

The trial period for the application of blockchain technology was completed during December 2015 - February 2016.

The trial was successful and the three companies will now use the results obtained in this operational trial to consider further the path to practical application of blockchain technology to cross-border securities transactions from March 2016.

 

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