R3 trials blockchain fixed income trading with 40 banks
Just released is a major blockchain announcement from financial technology innovation company R3 CEV. In short, they connected 40 banks to five different blockchains and allowed them to facilitate issuance, secondary trading and redemption of a fixed income product. This is noted as the biggest trial of carrying out a real-world financial markets process on a blockchain to date.
The trial represented the trading of fixed income assets between 40 of the world’s largest banks across the blockchains, using multiple cloud technology providers within R3’s Global Collaborative Lab. This could represent a big marker in how financial instruments are cleared and traded in the future, but the technology is still very new so it will be something to watch. To note, R3 is led by former ICAP electronic broking CEO David Rutter.
The banks connected to R3-managed private distributed ledger technologies built by Chain, Eris Industries, Ethereum, IBM and Intel. They evaluated the strengths and weaknesses of each technology by running smart contracts that were programmed to facilitate issuance, secondary trading and redemption of commercial paper, a short-term fixed income security typically issued by corporations to raise funding.
Each of the distributed ledgers ran a smart contract based on identical business logic to enable the banks to accurately compare the difference in performance between them. Cloud computing resources were provided by Microsoft Azure, IBM Cloud and Amazon AWS to host the distributed ledgers.
David Rutter, CEO of R3, commented: “This development further supports R3’s belief that close collaboration among global financial institutions and technology providers will create significant momentum behind the adoption of distributed ledger solutions across the industry. These technologies represent a new frontier of innovation and will dramatically improve the way the financial services industry operates, in much the same way as the advent of electronic trading decades ago delivered huge advancements in efficiency, transparency, scalability and security.”