Last week Peter Golder announced that he’d joined the London Stock Exchange Group (LSEG) as Head of Group Digital Assets, a newly created position. Golder was Chief Commercial Officer at the SIX Digital Exchange (SDX) for the last two years. SDX was the first major stock exchange to launch a digital assets platform supporting securities.
Golder started a week ago and reports to Murray Roos, Group Head of Capital Markets and Daniel Maguire, Group Head of Post Trade. A spokesperson for LSEG said that it was too early to elaborate on the LSEG’s digital asset plans.
Beyond cryptocurrencies, security tokens representing stocks, bonds, funds and other assets are viewed as an important frontier for blockchain. Automation can radically reduce the costs of securities issuance and administration. That means bonds and other asset classes can be traded in smaller denominations lowering the barriers to entry for investors and increasing the pool of investors.
The LSEG’s move to set up a digital assets group should be viewed in the context of the UK’s plans for a financial market infrastructure (FMI) sandbox, allowing institutions to experiment with blockchain. Specifically, certain aspects of current regulations are waved in contrast to the UK’s FCA sandbox framework. One area that the sandbox will explore is setting aside the need for a third-party central security depository (CSD). The EU also recently passed legislation for a similar initiative allowing the same institution to manage the trading exchange and operate the post trade aspects because, for digital assets, both aspects ideally happen on the blockchain.
LSEG’s background in digital assets is threefold:
- LSEG is developing a solution for UK equities post trade.
- It has an investment in Nivaura which provides technology for digital securities workflows.
- It acquired TORA, which enables crypto trading.
In February, the group spent $325 million acquiring TORA, the trading technology firm that also has a digital assets solution that links to almost 30 cryptocurrency exchanges. But don’t expect crypto to be a major plank of LSEG’s strategy.
Unsurprisingly the majority of its work has focused on securities. LSEG is a major investor in Nivaura, which has a digital workflow solution for the issuance and management of securities. While it’s not a blockchain company, Nivaura’s platform is ideal for launching digital assets. In February, the Nivaura solution was used to issue a debt instrument onto the Ethereum public blockchain, which was settled using the Fnality payment system, a platform supported by 15 major banks and Nasdaq. Natwest and Santander participated in the trial.
Notably, Golder has been on Nivaura’s board of advisers since the start of the year.
LSEG and Post trade DLT
The LSEG has been working on a UK equity post trade settlement system which was recently part of the UK’s FCA sandbox trials. The key benefit of DLT for post trade is creating a shared record of the trade that reduces trade breaks and costly reconciliations.
Dotun Rominiyi, Director of Emerging Technology at LSEG, spoke last year about the LSEG’s role as a ‘steward’ of the new digital ecosystem.
“We have a wealth of expertise in running mission critical Tier 1, Tier 2 financial service infrastructure. And being able to apply that in the digital world to enable these new solutions to come on board, deploy their (enterprise blockchain) Corda applications onto our network, where we can provide governance, oversight, support,” said Rominiyi at the enterprise blockchain event CordaCon in September last year.
“We can also solve for issues like interoperability, both to other private ledgers as well as public ledgers. And really do that once for the benefit of all. These are some of the ways in which we see us leveraging some of our core competencies to help grow and promote the development of the ecosystem.”
Meanwhile, several stock exchanges around the world are exploring either digital assets or post trade solutions or both.
On the digital assets side, Golder’s ex-employer SDX is the most advanced and is in production. In Japan, this month SBI is launching the Osaka Digital Exchange, which will support digital assets next year. And Tokyo Stock Exchange operator JPX has been involved in a blockchain-based green bond. Singapore’s SGX has a joint venture, Marketnode, for digital securities, starting with bonds.
On the post trade front, the highest profile example is the Australian Securities Exchange (ASX), but many stock exchanges worldwide are exploring DLT for post trade.
