Nasdaq and Nordic financial services group, SEB said Wednesday they are collaborating on a project to test a developed prototype for a mutual fund trading platform based on blockchain technology.
The aim is to increase efficiency in the processing of purchases and sales of fund units and to create a unit ledger, according to Nasdaq. The concept of the project indicates that, by subscribing to a private blockchain, the various market participants—fund companies, distributors and others—will be able to share a distributed database in which all transactions and changes are registered among all participants in real-time.
The cooperation agreement entails that SEB and Nasdaq will continue to develop the technology with the end goal of creating a working prototype, which will be based on the Chain.com blockchain ledger.
“With the help of a blockchain we can create a faster, simpler, more effective and reliable fund market,” said Göran Fors, acting head of Investor Services at SEB.
By leveraging blockchain technology there is strong potential for improvement via digitalization that can reduce manual work, create a faster process and reduce the risk for errors,” said Magnus Haglind, SVP & Head of Product Management, Market Technology, Nasdaq. “This development will look to benefit the fund market and, in the end, also the individual investors through faster response from purchases and sales.”
In contrast to the equities market, which relies on a Central Securities Depository (CSD), the Swedish fund market lacks a central, primary point for registering holdings.
This means that the administration of purchases and sales of fund units are handled through an intermediary or directly with each executing party. Since a chain can consist of many links – for example, when a customer via a Swedish bank buys units in a foreign fund company – a relatively large administrative process arises. This is handled today through a combination of different technical solutions, including orders placed by paper driven processes and follow-up phone calls.