Nasdaq and London Stock Exchange Group have both taken steps to grow the digital asset ecosystem as institutional interest increases.
Last month Nasdaq launched the Marketplace Services Platform which allows users to build new marketplaces across the trading lifecycle, from execution through to settlement, custody and payment, by using cloud-based plug and play components.
Magnus Haglind, senior vice president and head of product management, market technology at Nasdaq, told Markets Media that firms have traditionally developed their own infrastructure. This included buying hardware, developing software and installing connectivity which could take at least six to nine months, depending on the complexity.
“We have deployed the whole process in the cloud, so thanks to cloud and automation the time to establish and on-board a ready solution is substantially reduced to a few weeks,” he added.
The Marketplace Services Platform facilitates the frictionless exchange of assets, services and information across various types of market ecosystems and machine-to-machine transactions, including, but not limited, to standard financial assets, tokenized assets, credit card receivables, loyalty points, real estate, insurance contracts, gaming and wagering.
Read more about the @NasdaqTech launch here: https://t.co/Ztak5Lz7Mh pic.twitter.com/5QD8pMI7WS
— Nasdaq Exchange (@NasdaqExchange) June 24, 2020
Nasdaq’s already established services, including matching, risk management and market surveillance, will be accessible on the platform.
Haglind said financial services firms are ready for a rapid acceleration in their use of the cloud and software-as-a-service. “Security has the same logic as our best-in-class capital markets capabilities and cloud vendors have a secure set up,” he added.
Brad Bailey, research director at consultancy Celent, said in a statement: “We are at an inflection point in the capital markets. Building one’s own technology stack from application to infrastructure, without leveraging a platform with access to an ecosystem of partners for technology, services, cloud is becoming more difficult to justify.”
The Digital Assets Suite is agnostic to the underlying digital ledger technology, is multi-cloud and will also be accessible for marketplaces in Micorsoft’s Azure. Nasdaq is working with Digital Asset, R3 and Symbiont to deliver technology through the Marketplace Services Platform to meet the diverse needs and unique models of tokenized and digital assets marketplaces.
Haglind said: “We are working with firms such as R3 and the digital asset space has matured as vendors are moving into the next phase. We hope the number of partnerships will grow and create a broader ecosystem.”
He explained that some clients will still want to have infrastructure on their premises and take modules such as surveillance while start-ups, such as LEX, will start with the matching engine.
Leading commercial real estate firm @LEX_Markets has tapped @Nasdaq to power its trading platform. LEX will leverage the cloud matching service via the Nasdaq Marketplace Services Platform.
— Nasdaq Exchange (@NasdaqExchange) June 25, 2020
Read more here: https://t.co/D3d2OzuaRc pic.twitter.com/v29w84oWEI
LEX, a commercial real estate securities marketplace that enables investors to invest in individual properties, last month chose Nasdaq to power its trading platform via the Nasdaq Marketplace Services Platform.
Drew Sterrett, co-founder and chief executive of LEX, said in a statement: “Nasdaq’s market leading technology will allow LEX to scale with the sophistication of a global market and helps us achieve our mission of opening access to the asset class for both retail and institutional investors. Properties have historically traded hands over the course of years. Nasdaq is providing us with the technology to make it happen in under a second.”
Haglind continued that smaller traditional exchanges, who do not have a demand for low latency, may also want to innovate in infrastructure for their local markets using the new platform.
“We are not just providing technology for digital assets to Nasdaq but we are reducing barriers for proven infrastructure for the whole market,” he said.
He added that Nasdaq is creating value as this is a big change in how the industry develops software.
“Firms will have access to continuous upgrades, like consumer services, rather than refreshing their technology every three to five years,” said Haglind.
(Thread): Today, @NasdaqTech reveals the new Marketplace Services Platform, providing next-generation marketplace capabilities spanning the transaction lifecycle.
— Nasdaq Exchange (@NasdaqExchange) June 24, 2020
Learn more: https://t.co/AzFLghb4Dr pic.twitter.com/bPmRAh5Bo5
He added there has been interest from both traditional capital markets and other industries for the new marketplace. Nasdaq has a good pipeline and has also concluded a successful pilot for the Football Index, where clients can buy and sell shares in professional footballers.
London Stock Exchange Group
The UK exchange added 169 digital currencies, digital platforms and security tokens to its SEDOL Masterfile service, a comprehensive global security identifier covering 100 million financial instruments, on 22 June 2020.
LSEG worked with Digital Asset Research to put a robust and transparent vetting process in place to determine which digital assets would be added.
James Nevin, head of data solutions, ISD at London Stock Exchange Group, told Markets Media that 30 years ago SEDOL just covered UK equities but has grown to over 100 million securities across asset classes, with about 20 million currently live.
He said: “Institutional clients are beginning to invest in digital assets and the addition to SEDOL ensures they can be integrated into workflows like a traditional security.”
SEDOL security codes are global identifiers for securities allowing market participants to match trades more efficiently and reduce operational risk by enabling straight-through-processing. Other uses include portfolio valuation, processing price feeds and for reference data validation as a cross reference to other identifiers and price validation. Users include asset management, wealth management, insurance firms , custodians, data vendors and fund administrators.
Nevin added that the exchange is talking to digital trading venues and platforms about licensing the SEDOL code.
“This will increase transparency and help institutionalise the market as it develops,” he said.
The exchange makes ongoing additions to SEDOL. In the last few years LSEG has added US municipal bonds and is looking to further increase fixed income coverage taking advantage of data from within the group.”
DTCC
In May the US Depository Trust & Clearing Corporation unveiled plans to explore the benefits of digitalization in the public and private markets and whether new technologies can strengthen post-trade processes and reduce risks and costs through two case studies – Project Whitney and Project Ion.
Project Whitney is a prototype focused on exploring the potential for asset tokenization and digital infrastructure to support private market securities, from issuance through secondary markets.
Jennifer Peve, managing director, business innovation at DTCC, said in a statement: “The private markets are ripe for increased levels of automation and lack much of the infrastructure that has supported the public markets for decades.”
Project Ion explores whether the digitalization of assets and application of DLT can accelerate settlement and reduce cost and risk for the industry.
Murray Pozmanter, head of clearing agency services and global operations and client services at DTCC, said in a statement: “Project Ion is about working with the industry to further the value proposition on accelerated settlement leveraging new capabilities such as DLT and tokenized securities, and to learn how DTCC can best deploy these technologies to deliver additional value to clients and the industry.”
