Almost all of Wall Street thinks that the blockchain could be applied to institutional capital markets and many firms are already actively reviewing the technology, according to research from Greenwich Associates. Although primarily associated with bitcoin, the blockchain is increasingly being eyed by the financial services world as a potential boon for a range of functions. BNP Paribas research analyst Johann Palychata recently claimed that the distributed ledger could cause "total disruption" to the post-trade infrastructure, while Nasdaq OMX, Citi and UBS are all openly exploring its potential.
Although actual adoption in the capital markets is still limited, of 102 institutional financial professionals quizzed by Greenwich Associates, 94% believe distributed ledger technology could be applied in institutional markets, with nearly half actively reviewing it within their firms.
While the motivations for adoption are varied, settlement, counterparty and custodial risk reduction are all key drivers. From a product perspective, OTC derivatives, private stock, repo, and loan markets are viewed as the most likely asset categories to benefit from distributed ledger technology in the medium term.
Kevin McPartland, head, market structure and technology research, Greenwich Associates, says: "Given the growth in trading volume but still limited infrastructure, the markets for leveraged/syndicated loans and private stock are strong candidates for early adoption of distributed ledger technology."