Blockchain To Settle Stock Trades

The underpinning of cryptocurrencies is the blockchain, a “distributed ledger” that allows full transparency for all participants to see their transactions.

While cryptocurrencies have been stuck in regulatory hell with the Securities and Exchange Commission, a blockchain startup has received SEC permission to run a pilot program to settle stock trades almost instantaneously.

Paxos, a potential competitor to the Depository Trust & Clearing Corp., is planning to use their blockchain with a few banks in the coming months in an experiment to see if it can get rid of the paper and risk associated with settling transactions, while reducing costs.

This will cut the wait time from two business days.

The plumbing of the stock market is virtually invisible to most people. However, DTC settles over about $1 Trillion in trades EACH DAY.

The blockchain will allow banks to settle electronically rather than having to transfer cash and paper certificates.

paxos

(Chart: WSJ-Paxos).

https://www.wsj.com/articles/blockchain-makes-inroads-into-the-stock-markets-1-trillion-plumbing-system-11573131600?ns=prod/accounts-wsj

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at: http://www.linkedin.com/pub/jeffrey-a-koeppel/0/63/5a9
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