The London Stock Exchange is using IBM blockchain technology to make small to medium-sized enterprises (SMEs) in Europe that are not listed on a stock exchange more transparent to potential lenders and investors.
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Through its Italian subsidiary, Borsa Italiana, the London exchange expects to help unlisted SMEs get better credit and attract investment by making it easier for the relevant organisations to access information about them.
The technology is currently in a test phase with a small group of partners and clients of the exchange. It will digitise certifications of transactions, as well as information about shareholders, and replace the paper-based certificates that are used at present.
“Through our work with IBM on this blockchain solution, Borsa Italiana is taking the lead in transforming the way European SMEs manage their shareholder data and, at the same time, expand credit access – all on a trusted digital platform,” said Borsa Italiana CEO Raffaele Jerusalmi.
Due to a lack of transparency, SMEs have traditionally found it difficult to attract investors and get credit. But through the distributed ledger technology, stakeholders such as lenders, investors and regulators will have easy access to company information.
Chris Corrado, CIO at the London Stock Exchange, said the company was testing the use of blockchain where data segregation and confidentiality is vital.
“By working with IBM, a pioneer in building enterprise-class blockchain solutions, we are committed to building, testing and scaling our capabilities in emerging technologies over time,” he said.
Built on the Hyperledger Fabric version 1.0 blockchain framework, which is hosted by The Linux Foundation, the system is designed to ensure sensitive securities data can be shared among permissioned network participants without reducing security.
It is interoperable with the London Stock Exchange’s existing systems.
“Sharing secure and transparent critical network data across shareholder networks is difficult using traditional systems,” said Marie Wieck, general manager of IBM Blockchain. “Blockchain is poised to help remove some of these barriers in traditional methods for the transfer of value – much as the internet did for the exchange of information in the late 1990s.”
Storing and sharing highly confidential trading data in an efficient and secure way is seen as one of the great advantages of blockchain technology. For example, Abu Dhabi Securities Exchange (ADX) is using blockchain to provide controlled access to the annual general meeting (AGM) documents of listed firms on mobile devices.