Axoni and Credit Suisse join R3 to explore PoC on blockchain

The proof of concept (PoC) exercise also involved the Securities Industry and Financial Markets Association (SIFMA) and was coordinated by Credit Suisse. The bank aimed to create a distributed ledger prototype that would enhance the risk management, cost and efficiency issues inherent in managing financial reference data.

Axoni Core, Axoni’s proprietary distributed ledger software, simulated not only the collaborative management of reference data, but the use of that reference data for corporate bond issuance as well. The technology enabled participants to interact with reference data after issuance, with any proposed changes requiring validation by the underwriter to ensure the ledger provided a single, immutable record of all data related to the bond.

Reference data includes information such as financial product specification, issuer detail, counterparty information, currencies, corporate actions and prices. It is important for financial sector as it makes up 40% to 70% of the data used in transactions. Reference data needs constant maintenance as reference entity names, counterparties, and securities data might change over time. Currently, the lack of automation and a reliance on legacy systems and processes forces each institution to keep its own record of reference data. This might create inconsistencies and demand for resources for reconciliation.

Emerging regulations such as EMIR in Europe and the Dodd-Frank Act in the US have highlighted the need for financial institutions to effectively manage and maintain reference data.

This PoC exercise unveiled ways of applying the distributed ledger technology and its advantages as it could provide the capability for regulators and network participants to view in real time which parties on the ledger have created, issued and proposed amendments to the data record.