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Santiago bourse aiming to become blockchain 'app store'

Bnamericas Published: Saturday, September 07, 2019

The Santiago stock exchange is aiming to become an "app store" for blockchain-based applications for different industries in Chile, leveraging its successful experience with technology in short-selling.

Last week, the bourse announced an association agreement with the central securities depository (DCV) and local telco Gtd to create a technology consortium for the development of various blockchain-based applications for the financial market.

The agreement contemplates the development of a business blockchain network, a new infrastructure that will allow for the connection of local and international clients of the stock market through nodes provided by the consortium itself or installed in customer systems.

The network will be accessed through APIs (application programming interfaces) that will provide access to the different applications on the platform.

According to the stock exchange’s client and business manager, Andrés Araya, the partnership will allow third parties such as independent software vendors to build apps on the infrastructure platform.

"We're going to talk to banks, insurance companies, fintechs and traditional technology companies and open the discussion to other industries too," Araya told BNamericas.

After a trial period, a new business unit will be formed, separate from the stock exchange. IBM was the original technological business partner of the blockchain platform, but the bourse is now working with many other vendors including Microsoft for its Azure cloud platform.

UNIQUE IN LATIN AMERICA

In June 2018, the Santiago stock exchange launched the world's first blockchain system for securities trading in partnership with IBM.

The system is designed to help reduce errors, fraud and processing time for the short-selling market.

Araya said that within one year of operating, the bourse had managed to see an increase in short selling from 0.7% of the total daily transaction volume of shares to 3%. The goal is to reach 10% in the next 5-10 years.

In addition, the processing time from when a share is purchased to when the certificate is obtained by the new owner was reduced from five days to 90 seconds.

Despite the skepticism surrounding blockchain, given its much-hyped promise but few proven use cases to date, Araya said  he feels the technology is maturing but still lacks an ecosystem, a so-called interledger, where different systems can talk to each other.

"There are still a lot of silos in the banking system," he said.

"Back in 2008, when bitcoin first emerged, blockchain networks could process some seven transactions per second. Now it is at around 6,000 and I expect in the near future it will reach 30,000," Araya said.

To date, Santiago is still the only stock exchange with blockchain-based technology in Latin America, while other examples are few and far between and in places like the US and Switzerland.

The next project for the bourse is to start using the platform for bond trading, which is due to be implemented at the end of October.

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