DTCC proves blockchain can work for US equity markets (sort of)

DTCC built a blockchain-based clearing and settlement platform that could process over 100 million US equities trades per day

By Joe Parsons

Distributed ledger technology (DLT) is capable of processing an entire trading day’s volume, equal to more than 100 million trades per day in the US equity market, according to a combined study by several major companies.

The Depository Trust & Clearing Corporation (DTCC) partnered with Accenture and blockchain specialists Digital Asset and R3 to build a prototype of a US equities clearing and settlement system using DLT for the 19-week research project.

Accenture built a network of more than 170 nodes to model the financial ecosystem of exchanges, broker-dealers and market participants to capture matched equities trades from exchange DLT nodes. The DTCC then acted as the central counterparty (CCP) maintaining anonymity on the ledger.

The project showed that DLT is capable of supporting average daily trading volumes at peak rates, totalling 115,000,000 trades daily, or 6,300 trades per second for five continuous hours.

“We are excited to lead this important work to advance the performance capabilities of DLT and help create new possibilities for leveraging the technology more broadly across financial markets,” said Murray Pozmanter, head of clearing agency services at DTCC.

“As an early adopter of DLT, we are encouraged by the results of the study because they prove that the technology’s performance can scale to meet the needs of markets of different sizes and maturity.”

DTCC emphasised that the study is a starting point for using DLT for settlement, and only basic functionality has been tested with additional work required to determine if the technology can be used to meet the resiliency, security, operational needs and regulatory requirements of its existing clearance and settlement system.

“This project answered key questions and built serious confidence in blockchain’s ability to drive large scale transformation,” said David Treat, global blockchain lead at Accenture.

“The close collaboration with the DTCC and our alliance partners, Digital Asset and R3, enables us to push DLT performance to new levels against real world requirements and conditions.”

The Australia Securities Exchange (ASX) is currently the only market infrastructure implementing blockchain technology to clear and settle equities trades.

It plans to go live with the blockchain-based post-trade equities platform in either March or April 2021.