Exactpro Says Securities Post-Trade Processing Using Blockchain Technology Is Still Far Off

Exactpro Says Securities Post-Trade Processing Using Blockchain Technology Is Still Far Off

Post-trade processing is an integral part of the world’s financial market. It’s the backend process that ensures that both seller and buyer successfully transfer securities or cash and exchange ownership records. This makes it the “plumbing system” of the financial markets.

With blockchain becoming increasingly popular among financial institutions, there have been inquiries about the possibility of blockchain playing a role in the global money transfer channels.

To do that, the technology will need to be thoroughly tested, vetted and pushed to the very limits of its capability. This is the only way to determine if it’s capable of withstanding all forms of the harshest of conditions.

A company, whose job it is to determine if the necessary channels for the transfer and execution of money is in great shape, is Exactpro. A former LSE subsidiary, this company is like the “inspector” that checks the system for weaknesses, leaks and possible bottlenecks.

The company’s employees consist of experts and analysts whose sole job description is to push trading and clearing systems to the limit.

The firm is very familiar with the processes involved in successful post-trading activities. They have been consistently hired by tech, investment banking, securities exchange, and brokerage firms for this purpose.

Exactpro having looked at blockchain’s capabilities and potentials has stated that the distributed ledger technology (DLT) will take a while before attaining the technological maturation necessary to handle these processes.

In fact, the company stated that it’s still a few years away from being able to handle rigorous benchmark testing –a process that all software undergo before being used on a large scale.

According to Iosif Itkin, co-CEO and co-founder of Exactpro,

“I think there are still gaps in technology so we can’t assume that the fabrics already support everything,”[..] “I think it is still a question of a couple of years before there will be a radical shift from prototyping to software testing.”

And even when they’re set for testing, Itkin still isn’t sure that the technology will be able to scale through the first phase:

“Based on our experience in post-trade and what we’ve observed with the prototypes, I do have doubts on the outcome of the first rounds of real testing.”

What this means for some DLT projects targeting the post-trade market is that it may take a while before their technologies will become widespread. This is because they may have to push their starting dates owing to the intense stress testing their software will likely go through and fail.

So far, Exactpro is only looking to work with DLT platforms created by R3 Corda, Digital Asset and Hyperledger. The major challenges that these new technologies will encounter, will most likely be with their connecting to or running alongside legacy systems.

Exactpro’s methodologies revolve around trying to break battle-tested systems. New technologies such as DLT may not survive the onslaught of their battery.

The good news, however, is their tests are meant to reveal every flaw, thus helping companies working on a DLT based post-trade platform build a better, and more solid system. The company does hope that eventually, DLT will usher in a new era in the financial markets.

“We are looking at the systems that are most likely to be used as the foundation of the future generation of settlement and clearing systems, and Corda, Hyperledger, and DA look like the most probable candidates to serve as the foundation going forward.” Says Itkin.


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