The industry-owned DTCC says that while the current network of systems and service providers that underpin the global financial markets may have developed in a messy, sometimes uncoordinated way, it successfully provides the stability and reliability needed for efficiency and transparency.

However, the post-trade giant concedes that there are limitations to the current system, not least its siloed design, which could benefit from the streamlining and simplification that distributed ledger technology would bring. In a white paper, the DTCC argues that before the industry takes the plunge on the new technology, it must determine whether it is more cost effective than improving existing systems and whether it can overcome its inherent scale and performance challenges.

"Furthermore, there needs to be industry-wide discussion, including regulatory and policymaker engagement, and consensus on developing requirements and determining whether trusted third parties are best positioned to develop them," says the paper.

Currently, different parts of the industry are all rushing to investigate distributed ledger technology in an uncoordinated way, risking a repeat of the past and the creation of countless siloed solutions based on different standards. To ensure this does not happen, the DTCC is pitching itself as best positioned to support and coordinate the evaluation and standardisation of the distributed ledger platform to determine whether it is a better option than existing technology.

Specifically, it recommends exploring targeted opportunities to improve upon the existing infrastructure in certain defined areas where automation is limited, such as: master data management; asset/securities issuance and servicing; confirmed asset trades; trade/contract validation, recording and matching for more complex asset types; netting and clearing; collateral management; and, longer term, settlement.

Michael Bodson, president and CEO, DTCC: "The industry has a once-in-a-generation opportunity to reimagine and modernise its infrastructure to resolve long-standing operational challenges. To realize the potential of distributed ledger technology in a responsible manner and to avoid a disconnected maze of siloed solutions, the industry must work together in a coordinated fashion."

Read the whitepaper here: