LSEG Eyes Blockchain For Capital Raising
Ann Neidenbach, CIO of the London Stock Exchange Group, said the bourse is reviewing how to use distributed ledger technology to help smaller companies raise capital more efficiently, rather than in the post-trade space.
Neidenbach took part in a fireside chat at the Synchronize Europe: DLT & Crypto for Financial Institutions conference in London today.
@YuvalRooz Fireside chat with a major global market infrastructure on how the changing technology landscape, including blockchain, smart contracts, and digital assets, affects the local market and what LSEG are doing to adapt to the new world. #Synchronize2019 pic.twitter.com/wpzB8losxk
— Bryan D'Souza💡 (@Bryandsouza90) June 18, 2019
She said LSEG was taking a look at DLT and there is a team in the global architecture group which is spending a lot of time with the businesses.
“Other exchanges are focussed on DLT in post-trade but we are reviewing SME capital formation,” she added. “We want to help SMEs raise more money, more efficiently.”
Neidenbach continued that the group is also reviewing the digitalisation of securities and how to improve the efficiency of issuing equities and bonds.
Last month the exchange said it will be taking part in the UK Financial Conduct Authority’s next sandbox cohort to test integration of distributed ledger technology within its listing and trading venues. The UK regulatory sandbox allows new firms to test innovative products, services or business models in a live market environment, while ensuring that appropriate protections are in place.
Robert Barnes, global head of primary markets and chief executive Turquoise at LSEG, said in a report from the exchange, Fintech Comes of Age: “Our test, alongside Nivaura and select market participants, will integrate distributed ledger technology within LSEG-operated listing and trading venues to test market infrastructure for the issuance, admission and trading of equity securities, evidencing change of beneficial ownership.”
In February this year LSEG led a $20m seed and seed extension capital fundraising for Nivaura, a regulated fintech company focused on automating the issuance and administration processes for financial instruments. Nivaura was set up three years ago to automate the fragmented and manual processes involved in the issuance and administration of securities including bonds, loans, equity, and structured products.
Neidenbach added that a big opportunity for the group is to provide connectivity and infrastructure so that each individual firm does not have to build infrastructure themselves.
“We want to pivot to offer post-trade service to broker-dealers,” she said. “No-one spends money on the back office any more.”
She added that other opportunities are smart order routing and providing connectivity. For example, LCH, the exchange’s clearing arm provides risk management and connections to 23 other clearing houses.
Neidenbach said: “We have launched Shanghai-London Stock Connect stock connect. We are constantly talking to other exchanges about providing technology and connectivity.”
Yesterday London Stock Exchange Group admitted Huatai Securities to trading on the new Shanghai Segment of the main market of LSE.
Shanghai-London Stock Connect welcomes Huatai Securities, a leading technology-enabled securities group in China. This is the first issuer to trade on the Shanghai Segment of London Stock Exchange International Order Book. Learn more: https://t.co/NOjqU1Yi3G #stockconnect pic.twitter.com/0XLTn2yk9x
— London Stock Exchange (@LSEplc) June 17, 2019
Shanghai-London Stock Connect allows established Chinese issuers to raise capital in London and gives global investors access China A-share instruments from outside Greater China. Established London-listed issuers can also be traded in Shanghai.
Neidenbach continued that crypto exchanges also want to use LSE’s infrastructure such as its matching engine, clearing and central securities depository.
The regulated blockchain infrastructure platform announced the sixth broker-dealer to join.
The proof of concept uses smart contracts from Digital Asset and DLT from VMware.
The network is driving adoption of standardized post-trade swap data models and workflows.
The market maker will contribute real-time crypto market data before expanding into equities.
Pyth is built on a blockchain to handle receipt and distribution of fast-moving data.