Overview of Emerging Blockchain Architectures and Platforms for Electronic Trading Exchanges

Abstract

Several international electronic primary financial exchanges have begun to announce they will explore the adoption of blockchain technology in their trade processing and reporting for execution and clearing. Therefore, in this work we will begin by providing an overview of the new exchange regulations appearing in different jurisdictions around the world, including EMIR, Dodd Frank, MiFID I/II, MiFIR, REMIT, Reg NMS and T2S. We will discuss some of their key features, specifically in regard to transparency reporting and trade/transaction reporting requirements.

The current status of regulatory requirements for reporting and the massive data sets such regulation will generate as well as the significant challenges faced by firms and market participants in meeting such requirements in an automated manner, is a key to the discussion in this paper. We explain different blockchain solutions based on blockchain architectures being currently developed in the market place to handle key aspects of transparency and pre and post trade reporting requirements that will be universal in applicability in both UK, Europe and U.S. regulations.

In the process of this commentary we will discuss the different emerging architectures and features that are being developed in a range of different blockchain technologies. This will include details on different forms of blockchain technology including : permissionless blockchains, where anyone can participate in the veri cation process, i.e. no prior authorisation is required and a user can contribute his/her computational power, usually in return for a monetary reward. Permissioned blockchains, where verification nodes are preselected by a central authority or consortium. Public blockchains, where anyone can read and submit transactions to the blockchain and Private blockchains, where this permission is restricted to users within an organisation or group of organisations. We detail which market participants and which blockchain architectures are emerging as possible solutions for addressing pre and post trade reporting requirements in modern electronic exchanges.

Keywords: Blockchain; Blockchain transaction reporting; Trade reporting; Transparency

JEL Classification: G2