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A way of tracing transactions in keeping with the regulatory requirements of MiFID II
From the beginning, the Financial Services Industry has shown a real interest in the potential of blockchain technology, but practical applications have been limited.
Bank of Ireland (BOI) and Deloitte have come together to work on a proof of concept (PoC) project which looks at improving the customer experience and MiFID II regulation.
The experiment at BOI is a PoC which is focused on improving the customer journey within Global Markets and getting the Bank in a strong position for the upcoming MiFID 2 regulations, which come into force in 2018.
Single Customer View
From the outset, the aim of the project has been twofold. Firstly, it helps to centralise transactions in an efficient way creating a single source of truth or single customer view. Secondly, it aides in complying with the transparency requirements for MiFID II by displaying every single customer transaction and touchpoint.
"This was a great example of time well spent between Deloitte and BOI's Global Markets team to come up with a killer use case (simultaneously looking at operational and regulatory challenges) to explore and prove what distributed ledger technology can do" says
Lory Kehoe, Blockchain Lead, Deloitte Ireland
A key takeaway for both parties from this proof of concept has been the reaffirmation that blockchain technology can greatly help to increase transparency. Due to the fact that you record all information about each transaction (e.g. time stamping) on the blockchain, you can also unlock each transaction relatively simply again. The securities require transparency so there is continuous need for information that is found naturally on the blockchain. Due to the dynamism of BOI's Global Markets business, a large amount of data is produced and required in a short timeframe. Distributed ledger technology has the potential to enable BOI to centralise, scale up, secure, store and share a large number of transactions, which will be crucial in sharing information with other departments, banks and governmental entities and also adhere with the MiFID 2 regulations.
MiFID II Regulations
MiFID II is an EU directive that all EU Member States have to implement into their legislation at a national level. This applies not only to banks that make securities transactions but also to asset managers and advisers. On January 3 2018, it is expected that this law will be implemented, even though the legislative process is still ongoing. What is crucial here is the realisation that a new technology like blockchain technology can be leveraged to aid in adhering to the impending legislation.
Distributed ledger technology offers a number of potential and exciting opportunities for financial services organisations. For example, think of the life cycle of a share purchase or exchange and the associated number of times the details of the share purchase are recorded by the different parties involved, which is a lot! Simply put, if all parties were to use a common or shared ledger, this would then result in faster, transparent, more secure and more cost effective trading between the different entities.
Experimentation and Innovation
This POC between BOI and Deloitte has helped show just what the technology is capable of and move the blockchain journey one step closer from hype to prototype.
‘Blockchain technology is disrupting the financial services industry for the better when it comes to transparency, efficiency and improving trust. There is significant demand from our clients who are looking to use blockchain to speed up payments and settlement processes, aid fraud prevention and enable market predictions. By bringing together the best of Deloitte's technology and domain experts, we believe we can play a significant role in bringing distributed ledger technology usage within Financial services to a new level’ says David Dalton, Partner at Deloitte
Read the article on siliconrepublic.com: "Bank of Ireland experiments with Blockchain technology."
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