ICAP creates blockchain 'Rosetta Stone' to improve post-trade processes

ICAP, the world’s largest interbank broker, has created a blockchain “Rosetta Stone” designed to improve post-trade processes. The Rosetta Stone refers to an ancient hieroglyphic text, including multiple ancient languages, that was used to decipher messages carved into Egyptian ruins. ICAP used the term “Rosetta Stone” to describe its new system for managing securities post-trade processes, which is written into a single business process like the Rosetta Stone, so any seller can trade with any intermediary. ICAP wrote what they believe is a well-designed smart contract to use the current popular blockchain terminology, so the next step is to introduce actual blockchain technology into the new system for managing securities post-trade processes. The post-trade risk and information services department announced in March that it had successfully tested a blockchain prototype using multiple asset information and the Harmony matching network (which it has been working on). In an interview with CoinDesk, Jenny Knott, CEO of ICAP’s post-trade risk and information, explained why well-designed post-trade systems are designed to use various blockchain technologies.

Jenny Knott

“While the current smart contracts are compatible with Ethereum, we created a system that we think will be compatible with any relevant blockchain technology just in case Ethereum changes,” Knott said. Knott, who spent eight years at Santander, first proposed creating a parallel blockchain service that would run in parallel with ICAP’s automated processes after being appointed ICAP CEO in 2015. Building a team Three months after Knott took the job, ICAP’s investment arm Euclid recommended her to a newly formed private blockchain company Axoni, and the journey to explore the reasons for distributed ledgers began. In December, David Thompson, COO of UK ICAP subsidiary Traiana, joined Axoni to help build a post-trade prototype. Thompson selected a team of seven people from Traiana’s 350 employees and completed a test in February this year, transferring bank transaction data to smart contracts through network nodes. Starting with Traiana’s FX trading, the company is now building a blockchain system that runs parallel to the current reimagined business process, the Transaction Lifecycle Center, but has not yet interacted with consumers. The value of smart contracts Currently, Traiana’s team is working with Axoni to find out what will happen after blockchain integration, and expand the application of blockchain beyond just FX. However, the team must convince customers that the service is not just a toy for fun, but a service that can bring real value. Thompson added: “When you use blockchain technology in your system, you are actually asking customers to trust a new source of valuable information. To gain trust, you need to let customers know that although the new technology does the same thing as the traditional technology, it will be more efficient.” According to data released last Tuesday, the transaction volume of subsidiaries that have not integrated blockchain increased by 183% from 2015 to 2016, and now 3 million transactions worth $15 trillion are carried out on the Harmony network every day. Keeping up with the times As part of the ongoing testing, Traiana is working with one of its 500 partners to find out the flaws in the system. A test version of the smart contract-driven business process is expected to be available in the first half of next year, with a full version to be released by the end of 2017. Although ICAP’s early investment firm Euclid Opportunities has invested in blockchain company Digital Asset Holdings, and ICAP has already partnered with Axoni, Knott said it was important to keep his company’s options open.

Knott said there are still many unanswered questions about whether there will be one blockchain that dominates the financial sector, or one with many competitors. In the meantime, Knott’s company is busy preparing business processes for its eventual blockchain integration and educating regulators about the process. Last week, Knott convened a group of European regulators in Brussels for an educational session. “The key is making sure we are agnostic about the underlying technology,” she told CoinDesk. “Making sure we are rebuilding business processes that allow banks to instantly agree and verify transactions, and then have a digital signature that creates a legally binding transaction. That’s critical.”