by Joseph Young
IEX Trading Group, a US-based stock exchange, is trying to implement the blockchain technology into its upcoming gold exchange for greater transparency and efficiency in clearing and settling trade orders.
Matt Harris, managing director of Bain Capital Ventures which invested in IEX in early 2014, stated that company’s internal project TradeWind Markets will utilize the blockchain technology as the core infrastructure of a gold trading platform.
IEX and Harris believe that the inefficiency of trades and high transaction fees of orders and settlement of trades in the $5 trillion per annum gold market, which makes it difficult for even high profile investors to productively trade gold and other gold-related assets.
“It’s too slow, it’s opaque as to who owns what and when along the way, and there’s lots of room for error that requires manual reconciliation,” Harris said of the gold market. “A system that was instantly self-reconciling and 100 percent transparent would solve a lot of problems.”
Once developed and launched, the new blockchain-based gold exchange of TradeWind markets will be leveraged by The Investors’ Exchange of IEX, which was launched in August as an equities exchange for professional investors and traders.
As the second largest alternative trading system and platform in the US with over 1.5 percent of the market share, the blockchain network of TradeWind Markets and IEX will handle a substantially high volume of requests and settlements on a daily basis. Thus, an autonomous system integrated within a private blockchain network would allow the organization to transparently, securely, and efficiently clear trades without the presence of middlemen and other mediators.
Considering the serious daily volume that will be handled by the TradeWind Markets blockchain-based gold trading platform, the majority of the development phase will be focused on exploiting various technologies and methods for better scalability of the blockchain network. The difficult component of this development phase is, creating a scalable ecosystem while maintaining a certain level of security to protect the network from security breaches and hacking attacks.
Belgium’s Euroclear and Australia’s ASX Look into Blockchain
Since the beginning of 2016, an increasing number of stock exchanges and global trading platforms have begun to focus on the development of a blockchain-based platform for stock and asset clearance.
Belgium-based Euroclear, for instance, has already secured a strategic partnership with blockchain services provider and major cryptocurrency exchange itBit to develop a robust infrastructure and network for its gold exchange.
Euroclear’s project is the first solution in the market to handle the settlement of physical gold using the blockchain technology.
“We are excited to be partnering with Euroclear to develop a trusted digital infrastructure for gold. Precious metals are the first use case for Bankchain, and London bullion is a market in which a distributed ledger can have an immediate benefit,” said itBit CEO Chad Cascarilla in June.
ASX, the Australian Securities Exchange which publicly expressed their strong interest in the blockchain technology for a long period of time, announced on September 5 that chief executive and managing director of ASX Dominic Stevens aims to maintain its partnership with blockchain venture Digital Currency Holdings, headed by former JP Morgan Executive Blythe Masters.
“We’re working with Digital Asset Holdings on trying to get to a stage where we could contemplate [replacing ASX’s clearing system],” said Stephens. “That’s quite a project.”
With a few of the largest stock exchanges actively developing blockchain-based gold exchanges and trading platforms, both the ASX and IEX are leading a significant change in the financial industry.