Blockchain technology has been deployed in so many ways ever since it birthed its first digital currency. But while we have seen the technology being put to use in so many sectors, it looks like the financial sector will be the winner this time around again.
In the recent update made available by Credit Suisse, the investment bank mentioned that it is currently testing a blockchain service that will enable it to finalize stock trade settlement in less than two hours. If this is successful, the bank would be able to eliminate various issues related to backlogging. Notably, this same backlogging issue caused the halting of Gamestop and some other stocks earlier this year on the Robinhood trading platform.
The firm wanted to eliminate backlogging issues
Even though most brokerage firms make things look like they finalize and pay for submitted trades, the transactions usually take three days or more on the minimum. Should buyers or sellers refuse to pay when they are supposed to pay, the brokerage firms would be the ones at the receiving end of the issues.
To make sure that issues like these are eliminated, the system of the united state’s brokerage is arranged so that they are ideally collateralized. The massive amount of cash that they hold in their reserves is always adjusted by the size of the trading volume of the market.
This is easier when the trading volumes are small, but they experience issues when it comes to period that they are overwhelmed with a massive pool of trading volumes. Robinhood was in cold waters as they were requested to allow its users access to more collateral, which led to the halting of purchases and trades related to the stock.
The first trade was settled under two hours
Issues like these have always demanded a need for trivial solutions, which have been pending since the brokers are still using old-age computers. The bulk of the millions in trading volume being reconciled is rather tedious than being spelled out.
With Credit Suisse considering the use of blockchain technology, the firm noted that its first-ever transaction was carried out in less than two hours. Credit Suisse admitted that it was a whole new upgrade on their previous system, which would use the whole day before the transactions are carried out provided they are logged in before 11 am the same day.
While that is something worthy of being mentioned, Credit Suisse is facing issues with Archegos, with the bank saying that the aforementioned Bill Hwang-owned investment has failed to pay back the loan that it lent.