‘Flash Boys’ Protagonists Aiming New Exchange at Gold09.07.2016 By John D'Antona Editor, Traders Magazine
(this article first appeared on Reuters)
IEX Group, which rose to prominence with its bid to shake up stock trading in the United States, now aims to do the same in the more than $5 trillion-a-year gold market with a new exchange being created by its spinoff TradeWind Markets, a board member of the new venture said on Tuesday.
The protagonists of Michael Lewis’s book, “Flash Boys: A Wall Street Revolt,” are planning a gold exchange that would use elements of blockchain technology to improve transparency and the clearing and settling of trades, said Matt Harris, a managing director at Bain Capital Ventures. Bain has an investment in IEX.
Blockchain is a tamper-proof shared ledger that can automatically process and settle transactions using computer algorithms.
A lack of transparency is one of the problems that makes the gold market ripe for change, said Harris, who is on TradeWind’s board.
“It’s too slow, it’s opaque as to who owns what and when along the way, and there’s lots of room for error that requires manual reconciliation,” Harris said of the gold market. “A system that was instantly self-reconciling and 100 percent transparent would solve a lot of problems.”
TradeWind is lining up more equity investment partners and strategic and commercial partners for the venture, the launch of which is still months away, said the source.
IEX Chief Executive Officer Brad Katsuyama also sits on TradeWind’s board of directors, as do IEX Chief Technology Officer Rob Park and Sprott Chief Executive Peter Grosskopf.
IEX and Sprott declined to comment.
NEW KIDS ON THE BLOCK
While TradeWind is not the only firm looking to use new technology such as blockchain in the gold market, its parent, IEX, has earned a reputation as an innovator in the stock market.
The new gold exchange will leverage the technology used by IEX for its new equities exchange, The Investors’ Exchange, which it launched on Aug. 19 after operating for more than 2 -1/2 years as an alternative trading system (ATS).
The London Bullion Market Association is expected to soon announce an electronic platform for gold trading and a trade repository that would help increase transparency and liquidity in the market. The London Metal Exchange also said last month it was planning to launch spot and futures contracts for gold starting in the first half of next year.
Belgium-based clearing and settlement firm Euroclear said in June it was working with blockchain services provider itBit to develop a settlement system for gold using blockchain.
Securely swapping more than 120 coins now only involves a single transaction.
The partnership will focus on delivering an institutional custody solution for digital assets.
The equities venue will also be adding a flag for retail flow.
Second quarter volume was up 25% year-over-year.
The Hong Kong exchange is partnering to explore carbon opportunities in the region.