On September 27, the Nordic financial services group SEB together with Nasdaq announced a joint project to test a developed prototype for a mutual fund trading platform based on blockchain technology. The aim: to increase efficiency in the processing of subscription and redemptions of fund units and to create a unit ledger, an area which today is largely characterized by manual routines, long settlement cycles and paper driven processes.
In contrast to the equities market, which relies on a Central Securities Depository (CSD), the Swedish fund market lacks a central, primary point for registering holdings. This means that the administration of purchases and sales of fund units is handled through an intermediary or directly with each executing party. Since a chain can consist of many links – for example, when a customer via a Swedish bank buys units in a foreign fund company – a relatively large administrative process arises. This is handled today through a combination of different technical solutions, including orders placed by paper driven processes and follow-up phone calls.
We met with Erika Danielsson, head of Nasdaq Nordic Fund Market, to talk about the blockchain project and how new technology may transform the fund market in the future.
First, tell us a little about Nordic Fund Market and how you got involved in this project
Today Nasdaq offers the Nasdaq Nordic Fund Market (NFM) platform with the aim of increasing the efficiency for fund distributors and fund companies in the Nordics which I’m heading. It’s an electronic mutual fund service that enables straight through processing of orders and settlement. The platform was launched 2010 and I believe that it has successfully improved the infrastructure for our customers. I still see great potential to develop the infrastructure and it is exciting to discover what new technology can bring to the market. At Nasdaq we want to innovate good solutions for our customers.
Why has Nasdaq developed this blockchain prototype together with SEB?
SEB is a valuable partner with deep industry knowledge and who represents several of functions in the fund distribution chain e.g. fund company, transfer agent, distributor, bank and depositary. With joint efforts the project team is confident that it can proof to improve the infrastructure to reduce costs, operational risk and reconciliation with new technology.
Can you say a few words on the technology behind the platform?
I see a system that can be easily shared, immutable and a golden record for all participants which would benefit the market in many ways. The prototype is built on the Nasdaq Financial Framework utilizing blockchain infrastructure. The prototype distributes assets on a permissioned immutable ledger specifically developed to live up to requirements on scalability, performance and security that is needed for a blockchain service within the financial sector. For example, it is only the parties involved in a transaction that can view the transaction details.
What’s the goal with the project?
The goal with this project is to develop a first prototype and establish partnerships with market participants to continue build a common platform in order to lead the transformation of the mutual funds infrastructure. In the long run, new technology such as blockchain will improve the distribution landscape for mutual funds.
How will this initiative impact your current business?
Today we offer a B2B mutual fund platform for our Nordic clients. Nasdaq is constantly striving to be innovative and to evaluate and implement new technologies that can help us find the best solutions for our customers. For us to be able to offer this, we need to be in the forefront and blockchain brings great opportunities. We are looking forward to invite other market participants to continue to discuss the possibilities new technology brings.
Finally, what is your next step?
Now, we will work with SEB to test the prototype and at a later stage demonstrate this to the market.
To contact Erika: Erika.danielsson@nasdaq.com, Direct telephone: +46 8 405 6107
Read what the media is writing about the announcement: Reuters , Financial News and Dagens industri (in Swedish)”
The link to the release is available here >
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
