Open source blockchain ledger has enormous potential for derivatives
Blockchain is touted as revolutionary for
derivatives trading but experts have found several weak links;
the process of change will be an evolution. Dan Barnes
The transformation of the derivatives
market by distributed ledgers is being discussed at every level
of the industry. Through its ability to immutably and securely
record and validate transactions, the open source blockchain
ledger has enormous potential for derivatives market
participants, keen to tackle counterparty risk and transaction
'Smart contracts’ that
automatically trigger margin and redemption payments have been
of particular interest in the over-the-counter (OTC) market.
However Peter Randall, chief operating officer at Setl, a
blockchain technology provider, warns that much of this
discussion is not based in the real world.
"There is so much nonsense spoken about the nature of
self-paying derivatives and smart contract of
derivatives," he said at Mondo
Visione’s Exchange Forum on 12 November 2015. "OTC
derivatives are leveraged contracts, so the idea that they can
be captured, photographed, fully-funded, then dropped into some
sort of smart contract that in years to come will pay out, is
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