Abstract
The study explored the economic and operational impacts of Distributed Ledger Technology or blockchain, use in stock exchange processes. Blockchain's potential for reducing risk, increasing efficiency and reducing or eliminating intermediaries in post-trade clearance and settlement processes was the central aim of the study.To date, few empirical studies have investigated the complex requirements and impacts of the technology transition on organisational practices and behaviour, especially using qualitative case study methodology. There is also a critical need to examine the regulatory and legal aspects of using blockchain-based platforms for critical financial market infrastructure such as stock exchanges.
Using multiple case study descriptive methodology, primary data were collected using semi-structured interviews with participants from Singapore and Australian stock exchanges. Publicly available reports from the international financial services industry and regulators provided secondary data.
The study showed that blockchain can reduce stock exchange trade clearance and settlement process time from two or three days to minutes or seconds. Implementation can significantly enhance the efficiency of stock exchanges by heightening transparency, security, and speed, and reducing intermediation in various processes. Blockchain was also shown to enable rapid cross-border payment settlement and reconciliation, and improved regulatory reporting of post-trade clearance and settlement.
The study concluded that the introduction of central bank digital currency into stock exchange clearance and settlement systems could bring many benefits to the financial services industry and the economy. However, currently, blockchain can only work as a semi-decentralised system in stock exchanges. It cannot eliminate the role of the stock exchange as a central counterparty. In principle, blockchain can remove the need for other intermediaries such as brokering institutions and custodians. Nonetheless, in the real world, the multilateral financial market is not ready to remove these intermediaries from the value chain.
Despite the potential benefits blockchain may deliver to financial sector operations, thorough preparatory work, including proof-of-concept studies, is strongly advised, along with an incremental process for incorporating this emerging technology.
| Date of Award | 2024 |
|---|---|
| Original language | English |
| Supervisor | Abu MOLLIK (Supervisor) & Ian MACLEAN (Supervisor) |