Barely a week goes by without yet another announcement heralding a new blockchain initiative in capital markets. It almost seems that if you are the CIO of a major financial institution and you don’t have a blockchain project underway then you simply have nothing to talk about at dinner parties any more. But what is really going on is that these firms have finally figured out that their post-trade operations are woefully inefficient and represent an unacceptable burden in today’s economic environment. The key here is the difference between being effective and being efficient. Post-trade has to be effective otherwise everything breaks, but late nights, pizza and spreadsheets just aren’t the way anymore. But is blockchain the answer? I am not so sure. 

The central tenet of the blockchain argument is that it is a distributed ledger that everyone uses. And there’s your problem - unless everyone really is using it (and the same one at that) then we will still need those pesky central counterparties that cause all the friction in the first place. 

And yet post-trade can and must become more efficient, but there are quicker wins to be had. Take the repurposing of FIX for affirmation processing. This is simple, elegant and reuses existing industry infrastructure. So much so that it is now being piloted for research payments in transactional RPAs. Other good 'blockchainy' ideas such as smart contracts don’t actually need a distributed ledger to work either. 

More important is the idea that firms need to co-operate to reduce cost in non-differentiating areas of technology. You don’t need a distributed ledger to do that, just the will and determination to put aside competitive differences.