A distributed blockchain system has the potential to completely upend post-trade infrastructure, leaving many current market players redundant, according to a BNP Paribas analyst.
Writing for the French bank's Quintessence publication, BNP Paribas Securities Services research analyst Johann Palychata says that there are two potential outcomes if distributed ledger technology is integrated into the post-trade infrastructure.
The first is "total disruption" thanks to a blockchain system that allows all market participants direct access to the Decentralised Securities Depositary, to the exchange and to the post-trade infrastructure of clearing and settlement.
This could leave industry players redundant, says Palychata, although he speculates that the problem of keeping private keys of account s safe means that investors could decide to entrust an authority to look after them.
A second, less spectacular scenario could see blockchain tech integrated into the post-trade ecosystem, with custodians or settlement infrastructures using it to record the ownership and trades between themselves, but requiring investors to use a custodian to have access to the market.
In this world, the ledger will only be accessible to authorised market participants. Existing actors will remain in charge, although "their level of service could change and they may deploy new services that they could not in the past because the investments required were a huge barrier to entry".