London Stock Exchange maps out digital assets platform

In the following article (behind the Financial Times paywall), Philip Stafford and Laura Noonan discuss the London Stock Exchange plc’s (LSE) plans to build a system that will “improve the efficiency of buying, selling and holding traditional assets.”

It is not clear immediately where in the LSE’s infrastructure or offering this new system will sit. It is clear, though, that enterprises such as R3 Corda have built (and since launched) distributed ledger technology (DLT) - based post-trade and settlement infrastructure which have been re-purposed in other areas and organisations such as the European Central Bank have published reports from advisory groups on the use of DLT in securities post-trade processes.

The main difference between what I understand the LSE to be building and what R3 Corda built is that the LSE’s blockchain is permissionless. R3 Corda’s blockchain was permissioned (i.e. a participant had to be granted access and was not anonymous to other participants). The permissioned versus non-permissioned blockchain question is important given that a trading venue’s order book in the ordinary course should be anonymous, so it is reasonable to assume that the LSE would want the blockchain to remain anonymous. However, my question is how one squares the circle of the LSE needing to restrict access to the system only to “permissioned” members and participants without making the system “permissioned”.

Next steps will be interesting or perhaps not, and this project will progress as others have done (which is to say that they end up as solutions to problems the market does not have – yet or ever). That being said, the digital assets financial markets infrastructure space is a very interesting one at the moment. For example, ClearToken recently completed its first phase with successful industry proof of concept and moves towards authorisation – a project on which Shoosmiths is advising.