Shanghai Stock Exchange, among the world’s biggest securities trading places by market capitalization, is eyeing the usage of dispersed ledger technology in the securities market. The SSE published a research paper on Tuesday, which examined the usage of DLT in a variety of phases of a security transaction, like the pre trading client registration, securities issuance and trading, and post trading settlement. It moved on to outline some key advantages of adopting DLT in China’s fiscal infrastructure, like increasing the payoff efficiency by replacing the current T+1 model, under which a transaction can only be settled one business day after an order is executed.
As the world’s fourth biggest stock exchange with a market cap of $5.12 trillion as of December 2017, the SSE is a nonprofit organization directly administrated by the China Securities Regulatory Commission. With reference to existing work concentrated on the subject completed by its counterparts in other financial markets like Hong Kong and Australia, the SSE identified two possible areas in the report where DLT can be beneficial in China, saying: The overall worldwide consensus is that DLT will be a brand new revolution to the financial industry. The very first application use cases will be on the counter securities issuance and trading, as well as order book post trading settlement.” .
That said, the research paper indicated that a possible deployment of DLT in the Chinese stock market may still face a string of regulatory hurdles, as it’s in conflict with the current centralized registration and settlement system. For example, the SSE currently uses a 3rd party middleman as a custodian and for settling post trading transactions, yet the usage of DLT could basically eliminate that system. To do this, the market needs a new legal framework issued by regulators and central government agencies. The author of the paper concludes: The regulation should adapt to evolving technology. We suggest regulators handle the subject of DLT as a vital study area moving ahead.
To be able to develop a strong regulatory framework for adopting the fiscal innovation.” . Shanghai Stock Exchange picture via Shutterstock. The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.