Today startup Axoni announced that 15 sell-side and buy-side firms went live on its distributed ledger network for equity swap transactions. The first live trade was between Citi and Goldman Sachs.
The key benefit of the shared ledger is removing the need for reconciliations. Typically each party will record the transaction on their books, and they have to reconcile them with the counterparty. If there are millions of transactions, even automated reconciliation processes will produce numerous discrepancies that would need to be manually investigated. That costs time and hence money.
In the past, the issue was exacerbated because each company had its own way of recording transactions, making reconciliation far harder. In June 2018, the derivatives industry standards body ISDA published a new standard, the common domain model (CDM), and last year it released version two. Critically this wasn’t just about specifying data, but also about standardizing processes. With counterparties talking the same language, they can then share the same ledger.
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