The Potential of Blockchain and Why it Matters to Push the Boundaries

* Photo courtesy of Milken Institute

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For a second year, I was asked this year to participate in a panel discussion with Google, TwoSigma and Kensho at the Milken Conference on the influence of new technologies. It was a fantastic discussion on many topics. We discussed and debated the transformational impact of new technologies that are poised to become mainstream within the financial industry, most notably machine intelligence, cloud computing, and Blockchain technology. Because Nasdaq has initiatives and solutions across all of those technologies, I found it fascinating to be a part of the debate with such a great group of technology and industry pioneers.

The blockchain, and its potential, to either transform or disrupt elements of financial services was one of the topics with a lively discussion. The topic made me recall how last year, at this very event, I discussed how Nasdaq was pursuing the use of blockchain. At that time, most people had only heard of blockchain through trending news on the digital currency Bitcoin. At Nasdaq though, we were starting to discover how impactful the technology could be on the transfer of any asset, including securities, and began to imagine a new world of post-trade clearing and settlement.

In simple terms, blockchain is a database—but not your average database. The blockchain—technically a distributed public ledger—is an unalterable, record of peer-to-peer transactions. It provides a basis for legal transfer of ownership because of its immutable, perfect reflection of the history (aka the chain) of ownership of any asset across time.

Blockchain technology holds the promise of allowing capital markets to operate more efficiently, while simultaneously providing greater transparency and security. We are excited to explore the opportunities it provides Nasdaq, our clients and the ecosystem of global markets.

We envision a future where the post-trade infrastructure that we know today can be completely transformed within a decade. Currency, private and public equities, bonds, derivatives, commodities, derivatives, transaction records (e.g. trading), and settlement can all benefit from further real-time processing. As such, blockchain technology holds great potential to provide increased efficiencies to the financial sector and its end clients. .

As a world-leading exchange as well as a provider of technology to over 100 marketplaces worldwide, we believe that we are positioned to help make the transformation a reality, not only for our own markets, but for our clients as well.

Our first effort to implement the blockchain has been a huge learning experience for us. Specifically, we chose to apply the blockchain, branded Nasdaq Linq, within the Nasdaq Private Market (NPM), where we have a huge opportunity to modernize what is today a very slow, manual process of transferring ownership of shares in private companies.

In December 2015, we announced that an issuer was able to use our Nasdaq Linq blockchain ledger technology to successfully complete and record a private securities transaction. For this transaction, Nasdaq enabled the issuer to digitally represent a record of ownership using Nasdaq Linq, while significantly reducing settlement time and eliminating the need for paper stock certificates. In addition to its equity management function, Nasdaq Linq also provides issuers and investors an ability to complete and execute subscription documents online.

It was a powerful milestone for the use of the blockchain and for us to successfully push the boundaries of this technology. Nasdaq recognizes that the scope of blockchain technology is in its infancy and we are now looking at new ways to use blockchain to create efficiencies across the industry.

We hope that next year at Milken we find that more of the financial infrastructure is moving toward this revolutionary technology.

To learn more about our discussion at the Milken Institute Global Conference, please go to "Nasdaq COO on Blockchain and FinTech"

Read more of our coverage from Milken Global here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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