Swift just successfully completed a blockchain pilot project that could save asset managers time (and millions).
The blockchain is well suited to corporate action processing, which has traditionally required significant manual effort and been rife with errors, because it creates transparency and traceability of data across a shared network.
Ubiquitous bank-to-bank messaging platform Swift successfully trialed a blockchain-based application that it says could save the securities industry time and money.
Working alongside six other securities participants – including Citi and Northern Trust – Swift trialed a new method of communicating corporate events (like tender offers, stock splits, and Dutch auctions) on an online blockchain.
The new process simplifies an otherwise complex manual process of verifying a piece of news: “Our analysis found that asset managers often receive notifications from up to 100 different sources about the same corporate event, and the data is often different or contradictory from one source to another,” says Swift’s securities strategy director, Jonathan Ehrenfeld.
Instead of asset managers needing to sift through all that information to verify data, the system automatically conducts peer-to-peer comparisons and creates a single, accurate shared document about a given corporate action. The process reduced errors, saved time, and could lower costs: Inefficiencies in communicating about corporate actions are currently costing each market participant $3 to $5 million a year on average.
This is just the latest blockchain-related project to gain steam: A former Goldman Sachs trader recently launched a startup that’s using the blockchain to sell bonds. As Bain’s Thomas Olsen put it to Distilled recently: “Large financial institutions are seeing a window of opportunity” for Web3 and blockchain projects this year because of crypto’s problems.