IT providers for stock exchanges hardly dare to approach blockchain technology

More and more companies and institutions are enthusiastic about the blockchain technology. Since blockchain technology can be used to store all kinds of data in a tamper-proof and transparent way, it is used in a wide variety of areas. As Nasdaq reported on June 26, technology companies that provide IT infrastructures for stock markets and stock exchanges tend to hold back in this development. What is behind this?

This is the result of a study commissioned by Nasdaq and conducted by Celent, a market research firm advising financial institutions in the technology sector. For this, Chief Information Officers, Chief Technology Officers and other technology managers from 20 leading market infrastructure companies worldwide were interviewed.

Development at best at an early stage

One would expect that exchanges, custodians and other market infrastructure providers that track complex transactions, investments and trades would gratefully embrace distributed ledger technology. Instead, Celent found that such a development among market infrastructure operators worldwide is at best at an early stage. One fifth of the operators have no plans whatsoever to use the blockchain in the future. 5 percent openly admit that they do not have the necessary expertise for this. Although 70 percent are working on pilot projects, only 5 percent are already using some kind of DLT. According to The Wallstreet Journal, 70 percent of respondents use automated process automation, 40 percent rely on cloud computing and 35 percent even use artificial intelligence. A general rejection of advanced technology cannot therefore be assumed here.

Both banks, large software companies and governments are increasingly relying on blockchain technology. It is used in retail, manufacturing, distribution and other areas and is even referred to as a “must-have”. On June 26, The Wallstreet Journal reported that IT providers for stock exchanges have so far tended to avoid the blockchain rather than benefit from the technology as well.

The reasons

According to the Nasdaq study, there are very different reasons for blockchain sloth. On the one hand, there is a cost problem. For example, the IT budget is already being used for the maintenance of existing systems, leaving hardly any resources for innovations. On the other hand, strict guidelines regarding the IT structure of the stock exchanges put a stop to many blockchain ideas even before they are implemented.

According to Arin Ray, Celent’s senior analyst, strict security regulations inhibit the implementation of blockchain projects. For example, “the prevention of failures, the security and stability of the systems are very important because market participants are highly regulated and play a crucial role in the functioning of the markets”. The introduction of a new technology usually takes some time. In addition, security gaps may occur during this process. The fear of such possible complications when switching old systems to blockchain technology therefore seems to be the main reason why IT operators are reluctant to develop new systems.