We're starting to hear the first rumbles about the use of blockchain technology in the Financial Markets sector. Until now, most of the discussion about blockchain has been about its use in creating currency tokens and ways to exchange those tokens, and
about processing payments - probably because payment processing is about exchanging the value of token (ie electronic) money.
One of the off-putting parts of this has been that the call to "Cry Freedom!" begs the question, "So what will banks do to stop themselves being disintermediated?"
At this stage in the blockchain game in Financial Markets, it's worthwhile asking ourselves a similar question - partly to ensure that more FinTech start-up cash than necessary doesn't get thrown at ideas that may end up being just pie-in-the sky. If blockchain
technology were to disintermediate some parties in the Financial Markets sector, who would get disintermediated?
"Disintermediation!" was also a "eureka" cry in the early 1990s, as new technology (the public internet went commercial in 1993) opened up new possibilities for the markets. Initially many of the ideas seemed to be that brokers, who are intermediaries, could
disappear as their clients became more easily able to trade directly with each other. After a while there was a realisation that brokers use intermediaries too - exchanges - and that disintermediation might have greater impact on the role of exchanges.
Relatively little thought back then was given to intermediary market infrastructures other than exchanges - infrastructures such as CCPs and clearing houses and securities depositories. Exchanges have already been hit by waves of disintermediation - you only
need to look at the size of OTC markets across all asset classes to be aware of that. Could any impacts of blockchain technology be greatest in the post-trade sector?