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Blockchain technology has already initiated considerable waves in the stock market industry, offering massive potential for security, margin financing, and monitoring systemic risk.
Fremont, CA: Today, blockchain platforms are involved in the fundraising, asset management, post-trade settlement, and many other financial verticals. Blockchain's contribution to the stock market can solve the major issues related to interoperability, trust, and transparency. Factors like eliminating the intermediaries during the stock exchange, automation or decentralization, and highly secure post-trade processes make the blockchain a smart technology to implement in the stock market industry.
• Automating the Post-Trade Processes
Blockchain technology frames an intelligent contract to the post-trade activities, discarding any need of intermediaries, and reducing the operational risk, providing a secure infrastructure for quick trade settlement. It streamlines the real-time solution, improves liquidity, optimizes the supply chain, and also increases the transparency among the participants such as traders, brokers, regulators, and stock exchange.
• Trade Transparency
Implementing the blockchain technology can create an automatic surveillance system for the transaction. The block networks can track and report illegal sale easily, providing a standard security policy. The ledger design creates complete transparency and trust in the market due to the ability to access the full transactional report by the participants.
• Reduction in Transactional Cost
A blockchain transaction is faster- one of the primary reasons is the smart contract which eliminates the intermediary in the system. The absence of intermediaries minimizes the associated cost such as trade record keeping, audits, and trade verifications, automatically lowering the cost and lowering the entry barriers for individuals. The rise in the market base also increases liquidity and investment.
Blockchain has the potential to deliver immense possibilities, with promises to tackle problems like data loss, data fragmentation, insider trading, review margin system, reconciliation, and ticket matching. Adoption of this technology has a long way to go.