There are countless financial institutions that are rapidly using distributed ledger technology (DLT) in their operations. Similarly, IBM and CLS are working on a proof of concept (PoC) for the distributed ledger technology (DLT) platform called LedgerConnect for the financial services.
CLS and @IBM to foster ecosystem for financial institutions, FinTechs and software providers to share apps and services on a common #DLT network to realize operational efficiencies and cost savings across asset classes. https://t.co/T1qI4rrbjd #fx #fintech @IBMBlockchain pic.twitter.com/AIgGHMsoIr
— CLS Group (@CLSGroup) July 30, 2018
This will enable the banks and side firms- Fintech and software providers to deploy contribute and consume most of the services from the distributed ledger network.
However, this idea will share the apps and services on a familiar DLT platform which will offer financial processes the access to DLT-based services from a single safe network.
Alan Marquard, the chief strategy, and development officer, CLS quotes:
“LedgerConnect is part of CLS’s strategy to explore how we can provide safe and robust solutions that create efficiencies and reduce the risk for a diverse range of firms operating in the financial markets. We expect LedgerConnect to deliver enhanced efficiencies and economies of scale over single-purpose distributed ledger networks.”
CLS, IBM, and the Participants
CLS is a market infrastructure firm that drives in settlements and processes the data solutions. On the other hand, IBM is an American multi-national technology firm that handles the financial systems.
The firm vows to “help clients helm the changing FX marketplace, minimizing risk and creating efficiencies”.
First of all, the market network intelligence helps CLS specialists to build standardized solutions which resemble the existing market problems. Also, this is to make the trading process faster, simpler, secure and cost-effective as well.
The CLS holds a membership roster such as:
|BNP Paribas||Credit Suisse||Deutsche Bank|
|HSBC||Bank of China||Standard Bank|
|AIG||Bank of America||CIBC|
|Citi||Goldman Sachs||JP Morgan|
|TD||Wells Fargo||State Street|
The nine financial institutions that are participating in the PoC are Barclays and Citi. It is said that PoC will likely use some hand-picked services from Calypso, IBM, Baton Systems, SynSwap, Copp Clark, MPhasis, OpenRisk, and Persistent Systems.
IBM is a renowned blockchain player; its basic approach derives from the Linux Foundation “Hyper-ledger project” and its own IBM “Blockchain Platform” as well.
By using the LedgerConnect financial firms can access services in the sectors including:
- Know Your Customer (KYC)
- Collateral management
- Sanctions screening
- Market data
- Derivative post-trade process and reconciliation
However, by hosting the above services on a common, enterprise-level platform network, and engaging the organizations can switch the target from application development to the primary business objectives.
Additionally, the financial institutions are rapidly working to implement the distributed ledger technology (DLT) within their operations. However, the capital markets are facing these inefficiencies:
- Remain saturated with several systems
- Mostly operating similar business functions
- Retain silos of data which needs massive reconciliation processes.
IBM and CLS together believe that distributed ledger technology (DLT) can minimize the experienced inefficiencies. Also, altogether the technology can improve the speed of performing business. The only mechanism is to offer:
- A common, single, shared and distributed version of events
- One implementation of similar business functions.
The Working of the Rationale and Implementation
Many financial institutions might find it expensive and time-consuming to create and operate its own identical DLT infrastructure. LedgerConnect focuses to solve this issue by announcing a single-shared with the effective network where several services can be deployed and consumed.
Nevertheless, this might empower the financial institutions to transform the business processes rather than making multiple new blockchain networks, apps, and services. However, such diversions could lead to rapid interoperability charges and complexity.
LedgerConnect is a solution for you! This technology will operate on a private secure permission approved network which is combining based on the Hyper-ledger Fabric technology and IBM Blockchain Platform.
The LedgerConnect design will be applicable for regulated and security-conscious firms. It will also be accessible across the asset classes. Once, the PoC is successfully accomplished with the market demand, and receipt of all essential regulatory approvals; IBM and CLS will avail the platform widely to the industries. However, depending on the market demand, the additional ledger technologies support might be provided in the near future.
The general manager of IBM Blockchain, Marie Wieck stated that:
“Together IBM and CLS have been early pioneers in advancing blockchain solutions for the financial services space.” “Building on the success of CLSNet and leveraging the strong relationship CLS has with the world’s leading financial institutions, LedgerConnect is uniquely positioned as a blockchain marketplace for the financial services industry, which will accelerate innovation across the ecosystem with value added services for blockchain networks.”
Though, not yet proven, perhaps LedgerConnect has been inevitable. The fundamental lies within the words above: “As financial institutions increasingly work to implement DLT within their operations, capital markets remain saturated with multiple systems, often perform the same business functions (and) retain silos of data which require expensive reconciliation processes”. However, many financial institutions aim to reduce the back-office costs and infrastructure. This could offer the lead with one way forward.
On the other hand, the Enterprise Times has previously commented on the Inter-Ledger Protocol (ILP) about its potential. The major difference was seen in one of the analysis. Although, the difference is that ILP is open working whereas LedgerConnect is only in a state of viewing, mainly closed.
What do you think of the collaboration between IBM and CLS? Do you think this idea will work fine? Let us know via Twitter.