Deutsche Börse has set up a team of 24 people to co-ordinate its initiatives on distributed ledger technology, digital assets and possible new market structures across the whole group as technology innovation could potentially disrupt capital markets infrastructure.
Jens Hachmeister is leading the newly established DLT, crypto assets and new market structures unit. Hachmeister said in an article on the exchange’s website that Deutsche Börse views DLT/blockchain technology as an opportunity to create new market structures as the digital economy will be more decentralised. The new team has 24 members including Hachmeister and his deputy Eric Leupold.
“Its potential cuts across our entire value chain – pre-IPO/listing, trading and clearing, settlement and custody, and even the data and analytics business,” he added. “In future, there will be more peer-to-peer governed marketplaces and less intermediaries.”
He gave examples of new technology already challenging traditional market infrastructure providers including initial coin offerings, decentralised secondary market platforms and blockchain-based custody.
Hachmeister said: “Deutsche Börse has been active with the technology in a first phase of ideation and exploration. However, these explorative steps have not been coordinated on a group-wide level.”
His team will centrally operate all DLT/blockchain initiatives for the group, co-ordinating with business segments, IT, legal and regulatory strategy.
“Looking at the pace of technological progress and the transformational potential that lies in Blockchain, we probably stand at the beginning of a new era that could be disruptive for the whole industry,” added Hachmeister. “The challenge is that we don’t exactly know where this will lead to.”
Another German exchange operator, Boerse Stuttgart Group, launched a digital ventures company in September last year to work on innovative products in equities, cryptocurrencies and blockchain. Boerse Stuttgart Digital Ventures can also invest in startups and enter into partnerships with selected partners to implement its digitisation strategy.
Last month Boerse Stuttgart said it is aiming to create an end-to-end infrastructure for digital assets. Boerse Stuttgart is a floor-based exchange where retail investors can trade equities, securitised derivatives, bonds, exchange-traded funds and investment funds. The Stuttgart exchange is going to allow cryptocurrency trading via its app BISON, as well as launching a platform for initial coin offerings, a multilateral trading venue for cryptocurrencies and a custody product for digital assets.
BISON is being developed by Sowa Labs, part of Boerse Stuttgart Digital Ventures.
Ulli Spankowski, chief executive of Sowa Labs, told Markets Media last month: “BISON is aimed at retail investors but also has a complete API structure so that it can be used by institutions. Institutions will not be excluded and it will be a mixture of both worlds.”
In addition to looking for a regulated and reliable environment for trading with cryptocurrencies, investors are also looking for safe custody of digital assets. Boerse Stuttgart Group will offer custody services for the start of BISON and then extend the offering along the entire value chain for digital assets. Spankowski said: “We will provide an internal custody solution through working with trusted partners.”
Other exchanges are also launching infrastructure for digital assets. Switzerland’s stock exchange – owned and managed by SIX – said in July that it is building a fully integrated trading, settlement and custody infrastructure for digital assets.
Thomas Zeeb, Head Securities & Exchanges at SIX, told Markets Media: “In the move to digital a number of exchanges are using new technology largely to automate existing processes. While that may be appealing in terms of replacing legacy systems, I believe that they are missing a trick — the real value of new technology is not to replace old processes, but to fundamentally rethink how the business is done.”
In the US, Intercontinental Exchange has also said that it plans to form Bakkt, a new company which will use Microsoft cloud solutions to create an open and regulated global ecosystem for digital assets. The Bakkt ecosystem is expected to include federally regulated markets and warehousing along with merchant and consumer applications in the digital asset marketplace, which it estimates at $270bn.
— Bakkt (@Bakkt) August 20, 2018
ICE’s US-based futures exchange and clearing house also aim to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November this year, subject to regulatory review and approval. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.
CEO of @Bakkt saying exactly what we want to hear 👌
“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded.”https://t.co/qyo6gxfbud
— Matt Odell (@matt_odell) August 20, 2018
We couldn’t agree more with our CEO @strutton. @Bakkt‘s vision will be driving mainstream blockchain adoption in fintech. So excited to see a new influential woman in crypto: CEO Kelly Loeffler! https://t.co/wjA5UEzYbv
— Ironwood Research Group (@Ironwood_RG) August 20, 2018