Blockchain in securties

The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record financial transactions across a peer-to-peer network. By allowing digital information to be distributed but not copied, Blockchain technology created the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin Blockchain, mostly known as the backbone technology behind Bitcoin, is one of the hottest and most intriguing technologies currently in the market

History of the Blockchain

Features of Blockchain

Digital

Given that almost any type of information can be expressed in digital format and subsequently referenced through a ledger entry, a wide and diverse range of potential implementations emerge

Chronologically updated

The technology provides verification and authentication through permanent time stamping. Each block points .and refers to the data stored in the previous block in the chain, so all blocks are linked to one another

Cryptographically Sealed

Once a specific block in the chain is sealed, it can no longer be tampered with or changed, thus preventing deletion, copying or editing, essentially creating a truly digital asset

Distributed

An identical copy of the record is shared by all. The fact that the Blockchain can only be updated by consensus of a majority of participants provides an inherent safeguard, mitigating the risk of fraud and eliminating the need for a centralized coordinated verification process

Main Industries Where Blockchain Could Be Used

How Blockchain work?

Concepts of Smart Contracts in blockchain

Traditional contract Contain legal language on a vast number of printed documents and heavily rely on third parties for enforcement

Smart contracts are entirely digital and written using programming code languages, defines the rules and consequences in the same way that a traditional legal document would, can automatically execute the terms of a contract

The main goal of a smart contract is to enable two anonymous parties to trade and do business with each other, usually over the internet, without the need for a middleman

Blockchain use case — Trade Execution and Capture

1. Client place order (buy/sell a security) to broker (trade execution)
2. Broker records detail of client’s orders within order management system (manually or electronics)
3. Order details are forwarded to Trader
4. Trader enters the trade into the front office system. (trade capture), update trading position Trader decides whether to execute the trade on such terms (Order price is within market’s publish price etc.) Executed trade is handed over to the back office, then recorded to trading book without delay

5. Trader responses to broker, notice that the orders are executed or not

1. Broker records the detail of execution
2. Broker contacts the client to advise whether the order is executed or not. Trade confirmation will be required to issued

Business’s problem

• In some front office trade capture system, trade details are recorded manually by traders 🡪 trader will need maintain their trading position manually, keeping it updated with any trade 🡪Potential incorrectly recorded trade
• Trade details required being sent to the back office immediately, without delay
• The systems involved in capturing these trade details and client account information could easily be enhanced using blockchain technology

More secure and able to more quickly and efficiently send data to other members of the team

Suggestion and Expected Benefits by blockchain solution

At first, all parties of a trade transaction must come to business agreement (Smart Contract) on validation rule, calculation. Participants need to obtain an invitation or permission to join blockchain network

1. Clients CL can send messages to and place orders with their primary contact to Broker BF
2. Broker record Order in Order Management System
3. Broker BF forward the trade details in term sheet to Securities trader
4. Securities Traders ST 1 enter the trade detail, update trading position to ledger. While Securities Traders ST2 performs risk management such as determining whether the client has enough money to trade, the order price is within market’s publish price, etc..
5. Executed Trade is handed over to the BackOffice, conducted validation and recorded to the trading book.

As auditors, regulatory agencies observe the market and conduct auditing when needed.

Information about transactions is only shared with those parties to a transaction

Technical Solution

• Technologies Used
• Blockchain middleware: Hyperledger /Fabric
• OS : Linux Ubuntu 16.04
• Software : Sdk/nodejs 0.6.0/ API SDK
• Container: Docker 1.12, nodejs 0.12.7/ Runtime engine
• DB : MongodB 3.2 (Frontend web app)
• Language : golang 1.6, Javascript ES6
• Technologies Details
• Using permissioned ledgers (private Blockchain) to store the trade details
• Issuing asset-backed tokens for stock symbols
• Inquiring data from Blockchain-based system to verify trading execution results