Applicability of Blockchain Technology in Securities Settlement

Technological advancements are often adopted to financial markets to improve their operations and safety. Blockchain technology has been recognized as one of the potential technologies to be utilized in capital markets. The goal of this article is to evaluate the applicability of using the blockchai...

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Autor principal:	Jānis Bauvars
Formato:	article
Lenguaje:	EN
Publicado:	Riga Technical University 2021
Materias:	blockchain securities settlement financial markets decentralized databases blockchain architecture Information technology T58.5-58.64
Acceso en línea:	https://doaj.org/article/a52a358254874ae5bf864a456069c375
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spelling	oai:doaj.org-article:a52a358254874ae5bf864a456069c3752021-11-05T12:04:37ZApplicability of Blockchain Technology in Securities Settlement2255-992210.7250/csimq.2021-28.03https://doaj.org/article/a52a358254874ae5bf864a456069c3752021-10-01T00:00:00Zhttps://csimq-journals.rtu.lv/article/view/5223https://doaj.org/toc/2255-9922Technological advancements are often adopted to financial markets to improve their operations and safety. Blockchain technology has been recognized as one of the potential technologies to be utilized in capital markets. The goal of this article is to evaluate the applicability of using the blockchain technology in securities settlement process. First, the theoretical background of blockchain technology is reviewed and the current financial market infrastructure is examined. Then Central Securities Depositories Regulation and the current securities settlement processes are examined. Blockchain applicability framework designed by Gourisetti, Mylrea and Patangia is applied to assess the blockchain technology’s applicability to securities settlement. The results suggest that blockchain technology can be applied to securities settlement, and the used blockchain type should be a private blockchain with Proof-of-Authority consensus mechanism. A blockchain architecture model, based on a model provided by Zhuang, Chen, Shae and Shyu, and potential node structure for securities settlement are developed, taking into account the existing literature on blockchain technology, financial markets, and Central Securities Depositories Regulation. The proposed blockchain architecture model and node structure are then evaluated against scholar expected benefits and drawbacks of using blockchain for securities settlement and cross-border settlement efficiency. The evaluation reveals that the proposed blockchain technology model can potentially improve some of the current securities settlement issues, such as costly reconciliation and difficult cross-border securities settlement. At the same time, using blockchain technology in securities settlement would be challenging because the practical implementation time would be long and would require market-wide commitment. The main artefacts of this article are the proposed blockchain architecture model and node structure that would allow securities settlement processes to be executed using blockchain technology.Jānis BauvarsRiga Technical Universityarticleblockchainsecurities settlementfinancial marketsdecentralized databasesblockchain architectureInformation technologyT58.5-58.64ENComplex Systems Informatics and Modeling Quarterly, Vol 0, Iss 28, Pp 34-58 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	blockchain securities settlement financial markets decentralized databases blockchain architecture Information technology T58.5-58.64
spellingShingle	blockchain securities settlement financial markets decentralized databases blockchain architecture Information technology T58.5-58.64 Jānis Bauvars Applicability of Blockchain Technology in Securities Settlement
description	Technological advancements are often adopted to financial markets to improve their operations and safety. Blockchain technology has been recognized as one of the potential technologies to be utilized in capital markets. The goal of this article is to evaluate the applicability of using the blockchain technology in securities settlement process. First, the theoretical background of blockchain technology is reviewed and the current financial market infrastructure is examined. Then Central Securities Depositories Regulation and the current securities settlement processes are examined. Blockchain applicability framework designed by Gourisetti, Mylrea and Patangia is applied to assess the blockchain technology’s applicability to securities settlement. The results suggest that blockchain technology can be applied to securities settlement, and the used blockchain type should be a private blockchain with Proof-of-Authority consensus mechanism. A blockchain architecture model, based on a model provided by Zhuang, Chen, Shae and Shyu, and potential node structure for securities settlement are developed, taking into account the existing literature on blockchain technology, financial markets, and Central Securities Depositories Regulation. The proposed blockchain architecture model and node structure are then evaluated against scholar expected benefits and drawbacks of using blockchain for securities settlement and cross-border settlement efficiency. The evaluation reveals that the proposed blockchain technology model can potentially improve some of the current securities settlement issues, such as costly reconciliation and difficult cross-border securities settlement. At the same time, using blockchain technology in securities settlement would be challenging because the practical implementation time would be long and would require market-wide commitment. The main artefacts of this article are the proposed blockchain architecture model and node structure that would allow securities settlement processes to be executed using blockchain technology.
format	article
author	Jānis Bauvars
author_facet	Jānis Bauvars
author_sort	Jānis Bauvars
title	Applicability of Blockchain Technology in Securities Settlement
title_short	Applicability of Blockchain Technology in Securities Settlement
title_full	Applicability of Blockchain Technology in Securities Settlement
title_fullStr	Applicability of Blockchain Technology in Securities Settlement
title_full_unstemmed	Applicability of Blockchain Technology in Securities Settlement
title_sort	applicability of blockchain technology in securities settlement
publisher	Riga Technical University
publishDate	2021
url	https://doaj.org/article/a52a358254874ae5bf864a456069c375
work_keys_str_mv	AT janisbauvars applicabilityofblockchaintechnologyinsecuritiessettlement
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Applicability of Blockchain Technology in Securities Settlement

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