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Digital Economies Market Infrastructures as Catalysts

Special from [email protected] or DTCC Connection | October 30, 2018

Michael Bodson, DTCC President and CEO
Michael Bodson, DTCC President and CEO

Michael Bodson, President and CEO at The Depository Trust & Clearing Corporation (DTCC), discusses why he believes distributed ledger technology (DLT) is a powerful technology that could transform post-trade processing.

[email protected]: What role do you think market infrastructures, can or should play, in the adoption of new technologies in financial markets and the development of digital economies?

Michael Bodson: As a market infrastructure, DTCC has a unique vantage point to encourage and support industry-wide collaboration, facilitate and participate in dialogue with our peers and work across key stakeholders to develop industry standards and protocols to optimize the benefits of new technologies. At DTCC, we also are committed to experimenting with and using fintech where appropriate to drive greater efficiencies and cost savings in the post-trade process while maintaining the highest levels of risk management. When a new technology can have significant positive impact on the industry, market infrastructures can act as the catalyst to drive wide-scale adoption for the benefit of all participants, rather than just a few firms.

[email protected]: What barriers exist in adopting new technologies or creating digital economies? How do you think these can be overcome?

MB: When considering barriers around the adoption of new technologies, three come to mind. First, when introducing a new technology or component into any ecosystem, market safety and stability remain priorities. The same applies to the implementation of emerging technologies in financial markets – they must adhere to regulatory and risk requirements. If a new technology is to be adopted successfully and safely, it must undergo stringent testing and be implemented according to best practices. Second, the adoption of new technologies must provide business value. There has to be a valid business case to adopt any new technology, delivering benefits and capabilities beyond today’s solutions. Third, it’s important that regulation continues to evolve in a way that supports innovation while safeguarding the industry. It’s critical that we continue to engage with regulators around the globe early on and throughout the process, sharing knowledge on new technologies in order to promote an environment that supports innovation. At the same time, regulation must evolve in order to remain relevant and applicable to a rapidly changing technology environment.

[email protected]: Which technologies do you think are the most promising for the future role of infrastructures or in a digital economy? What is DTCC’s experience with such technologies?

MB: At DTCC, we’re actively working with distributed ledger technology (DLT) and the cloud. We are excited about the benefits that DLT can deliver for certain post-trade processes, and we look forward to launching our re-platformed Trade Information Warehouse using DLT and the cloud in 2019. We are also actively exploring other emerging technologies like robotics and artificial intelligence, with use cases and projects under way. Ultimately, we believe fintech can be a game-changer for the industry, particularly when you layer different new technologies on top of one another. Cloud is already changing the industry and could potentially have the most significant impact of any other technology available today. DLT is also a powerful technology that could transform post-trade processing, although the full impact may not be felt for several years. AI, while requiring deeper technology expertise, may provide more extensive strategic value longer term especially when coupled with robotic process automation capabilities. One thing is certain – fintech will transform the global markets in the years ahead.