An initiative by the Swiss Bank, UBS, recently encouraged leading banks all over the world to look towards blockchain technologies to help support the mass amount of data institutions are required to process on a daily basis. The project, known as the Massive Autonomous Distributed Reconciliation (Madrec) platform has been designed by UBS, Thomson Reuters, Barclays, SIX, Credit Suisse, and KBC.
Current practice dictates that regulated financial institutions should use legal entity identifiers. These identifiers are stored in an international system and are used to conduct transactions on the clients' behalf, even without the client necessarily having access to all the relevant codes. However, due to a recent change in regulatory policy, this practice will be replaced with a system referred to as the Markets in Financial Instruments Directive (MiFID) II. This system will require all parties conducting a transaction to have access to, and use, a host of different codes just to conduct a single transaction. The new system is scheduled for implementation on 3rd of January, 2018.
In order to minimize the inconvenience of the new system, banks have collaborated on the Madrec system, which will function has a reconciliation platform for all institutions in the industry. The service will be made possible via hosting on Microsoft’s Azure cloud service.
In a recent interview, Peter Stephens, acting head of UBS’ blockchain research and development department, recently detailed how the landscape of the blockchain industry is changing. Blockchain technologies are becoming the preferred method to process data over its alternatives. According to Stephens, Madrec will be UBS’ first go-live project.
During the interview, Stephens gave a tour of the UBS lab, where Madrec was first conceived and subsequently developed. The project was conceived and developed in UBS’ blockchain research and development lab located in London. Initially, the initiative was called Project Conrad. Currently, the lab is engaged in several other projects with their partners and intend to launch a total of six blockchain-based projects in 2018.
Stephens noted that Madrec could greatly ease the strains imposed on banks by increasingly tight regulatory policies. Madrec was designed over the course of six months and quickly developed into a network based on smart contract technology. Madrec implements identifiers from The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) and other financial agencies. Madrec will be able to reconcile all of LEI ROC’s data as well as data from the European Securities and Markets Authority (ESMA).
The blockchain smart contract system will also allow firms to have a more convenient banking process, as Madrec will ensure the accuracy of the required details. To achieve this, the mass amounts of data have been hashed on the Ethereum blockchain network. However, the source data is still with the institution in question. After initiating the transaction, the smart contract system will quickly reconcile the data input. After this, users can double check the data and modify if necessary.
Stephens noted that this process will hold financial institutions all over the world to a single standard, which is likely to raise the standards of most institutions. According to Stephens, this process will enhance several factors pertaining to the institution in question, which is likely to impact their bottom line in the most positive sense. Stephens added that Madrec holds several benefits for all parties involved. Regulators are happy because it's easy for institutions to comply with their policies. Institutions are happy because it keeps the process simple yet compliant.
Madrec is currently in its pilot phase, where they will use a total of 22,000 neutral reference codes for cash equity issuers. The pilot will be completed by end of January and be implemented shortly after, depending on the success of the pilot.
Current practice dictates that regulated financial institutions should use legal entity identifiers. These identifiers are stored in an international system and are used to conduct transactions on the clients' behalf, even without the client necessarily having access to all the relevant codes. However, due to a recent change in regulatory policy, this practice will be replaced with a system referred to as the Markets in Financial Instruments Directive (MiFID) II. This system will require all parties conducting a transaction to have access to, and use, a host of different codes just to conduct a single transaction. The new system is scheduled for implementation on 3rd of January, 2018.
In order to minimize the inconvenience of the new system, banks have collaborated on the Madrec system, which will function has a reconciliation platform for all institutions in the industry. The service will be made possible via hosting on Microsoft’s Azure cloud service.
In a recent interview, Peter Stephens, acting head of UBS’ blockchain research and development department, recently detailed how the landscape of the blockchain industry is changing. Blockchain technologies are becoming the preferred method to process data over its alternatives. According to Stephens, Madrec will be UBS’ first go-live project.
During the interview, Stephens gave a tour of the UBS lab, where Madrec was first conceived and subsequently developed. The project was conceived and developed in UBS’ blockchain research and development lab located in London. Initially, the initiative was called Project Conrad. Currently, the lab is engaged in several other projects with their partners and intend to launch a total of six blockchain-based projects in 2018.
Stephens noted that Madrec could greatly ease the strains imposed on banks by increasingly tight regulatory policies. Madrec was designed over the course of six months and quickly developed into a network based on smart contract technology. Madrec implements identifiers from The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) and other financial agencies. Madrec will be able to reconcile all of LEI ROC’s data as well as data from the European Securities and Markets Authority (ESMA).
The blockchain smart contract system will also allow firms to have a more convenient banking process, as Madrec will ensure the accuracy of the required details. To achieve this, the mass amounts of data have been hashed on the Ethereum blockchain network. However, the source data is still with the institution in question. After initiating the transaction, the smart contract system will quickly reconcile the data input. After this, users can double check the data and modify if necessary.
Stephens noted that this process will hold financial institutions all over the world to a single standard, which is likely to raise the standards of most institutions. According to Stephens, this process will enhance several factors pertaining to the institution in question, which is likely to impact their bottom line in the most positive sense. Stephens added that Madrec holds several benefits for all parties involved. Regulators are happy because it's easy for institutions to comply with their policies. Institutions are happy because it keeps the process simple yet compliant.
Madrec is currently in its pilot phase, where they will use a total of 22,000 neutral reference codes for cash equity issuers. The pilot will be completed by end of January and be implemented shortly after, depending on the success of the pilot.