The London Stock Exchange Group plc has teamed up with IBM Corp. to build a solution using digital ledger technology, or blockchain, to allow small and medium-sized European businesses to digitize corporate securities.

Using the technology, LSEG expects to help simplify the way that businesses track and manage shareholding information. The new system will create a distributed shared registry containing a record of all shareholder transactions in a secure, tamper-proof format in order to open up new opportunities for trading and investing.

“Sharing secure and transparent critical network data across shareholder networks is difficult using traditional systems,” said Marie Wieck, general manager at IBM Blockchain. “Blockchain is poised to help remove some of these barriers in traditional methods for the transfer of value – much as the Internet did for the exchange of information in the late 1990s.”

The platform is being built and tested by Borsa Italiana, LSEG’s Italian exchange operator, the companies said in an announcement today. Borsa Italiana will be taking the lead in a project and use it to digitize its own shareholder registry of issued securities and test the new solution for its management streamlining capabilities.

“LSEG is testing the use of blockchain technology in a financial business network where data segregation and confidentiality is vital,” said Chris Corrado, chief operations and information officer of LSEG. “We are committed to building, testing and scaling our capabilities in emerging technologies over time.”

With this blockchain solution, unlisted small and medium-sized enterprises will be able to replace paperwork with a secure, automated system for certificates that are currently used by private institutions. The use of a blockchain for this purpose would streamline the process and provide increased insight and all parties – including issuers, regulators and investors – will gain increased insight into company information.

The system will be built on IBM’s Hyperledger Fabric version 1.0, a blockchain framework developed using the Hyperledger Project hosted by The Linux Foundation. Hyberledger was developed as a blockchain solution that can deliver enterprise-grade capabilities alongside security and auditability for sensitive business processes such as the issuance of securities.

Experimentation with blockchains in the financial technology industry has been expanding for the past few years. Enterprise use of blockchains for securities issuance include Nasdaq’s Open Access Protocol in the United States, Fujitsu Limited and Mizuho Bank test solution for transactions in Japan and, as recently as May, Chile’s Santiago Exchange used IBM’s Hyperledger blockchain to manage trades.

Image: Pixabay