Jennifer Peve, DTCC Managing Director of Business Development and the Office of Fintech Strategy
Earlier this month, I joined leaders and regulators for a discussion on timely topics and issues involving financial technology at the U.S. Commodity Futures Trading Commission (CFTC) Technology Advisory Committee (TAC) meeting.
During the event, I had the opportunity to share my perspective on blockchain or distributed ledger technology, and discuss DTCC’s role in exploring financial technology and its potential to enhance the post-trade infrastructure.
Technology innovation has captured the attention of so many in our industry over the last several years. The rapid pace of change that is facing our sector today, while nothing new, continues to accelerate. Fintech innovations such as blockchain or distributed ledgers have great potential to bring about transformative change in our industry.
Keeping up with the rapid pace of innovation is both a challenge as well as an imperative as it affects so many aspects of financial products and markets. It forces financial institutions and financial market infrastructure providers to consider how emerging technologies may disrupt our business, re-shape how work is done, make better use of massive quantities of data, drive cost savings and modernize our infrastructure.
At DTCC, we are actively exploring how transformative technologies can enhance the post-trade process by further mitigating risk and reducing costs while ensuring our applications are consistent with key policy objectives of risk mitigation, market safety, certainty, reliability and efficiency.
As an example, in January 2017, we announced we would re-platform its Trade Information Warehouse (TIW) for credit derivatives using a combination of cloud and DLT. The TIW is a repository which provides lifecycle event processing services for approximately 98% of all credit derivative transactions in the global marketplace.
As with any innovation, operationalizing the technology with appropriate use cases helps to strengthen solutions and can often highlight limitations of the technology that must be addressed. Our work on the TIW project over the last year has given us a great deal of real-world experience in developing a replacement for a critical, industry-wide mainframe application. This initiative has taught us what works and what doesn't. We've seen the DLT’s limitations and discussed workarounds and/or tradeoffs with our technology providers and design partners.
"Keeping up with the rapid pace of innovation is both a challenge as well as an imperative as it affects so many aspects of financial products and markets."
We understand that DLT is still a nascent technology, but it is evolving rapidly and the challenges we have today will likely be solved tomorrow. Realizing the full potential of DLT requires a significant industry commitment as changing industry business models takes time.
It also requires common global data standards and interoperability for DLT. A common set of global standards could promote wide spread implementation and facilitate interoperable systems, thereby helping to prevent the creation of siloed systems.
Innovation requires learning and experimentation. At DTCC, we will continue to actively experiment with the technology ensuring that DLT initiatives align with the core principles of mitigating risk, enhancing efficiencies and driving cost efficiencies.