In a move that could aid MiFID II compliance, the Toronto Stock Exchange (TMX) and the UK's National Physical Laboratory have carried out an experiment which saw atomic clocks used to timestamp trades which were then recorded directly on a distributed ledger.
The 'Atomic Ledger' project recorded over 20 million transactions from three hours of trading to the ChainZy distributed ledger system from vendor Z/Yen.
The experiment is being linked to MiFID II legislation slated to arrive in January, which mandates more accurate timestamping traceable to Co-ordinated Universal Time (UTC) to promote improved transparency and better deals for customers.
UBS has already signed a deal with the NPL for a trusted timestamping service as a way to ensure compliance with the MiFID II RTS 25 timing traceability requirement.
The new test used nanosecond resolution high-frequency data from the TMX located in Interxions’s London data centre. The researchers timestamped digital orders of varying programing length written to execute a series of buy and sell instructions.
These were either logged using the atomic clocks at NPL, or logged with UTC plus a randomly generated time lag. The orders were then sent to a central clearinghouse also operating on UTC and written onto a ChainZy distributed ledger.
NPL is now set to work with Strathclyde’s Centre of Financial Regulation and Innovation to analyse the importance of timing in how orders are ‘cleared’ and says the results will provide insights into the need for precision timestamping in financial transactions, preferably at the microsecond level.
Leon Lobo, strategic business development for time and quantum, NPL, argues that the application of precise, traceable and certified timestamps as applied to the nodes of a distributed ledger system, will enable a trusted approach to the transactions as having existed at that point in time, across all platforms.