The Tel Aviv Stock Exchange (TASE), the primary stock exchange of Israel, has partnered with technology firm Accenture PLC (ACN) and an Israeli fintech firm called The Floor to develop a Blockchain Securities Lending (BSL) platform. It will be used to facilitate direct lending of all financial instruments on the exchange using the underlying blockchain technology. (See also: HSBC Makes First Blockchain Trade Transaction.)
At present, the Israeli securities market lacks a centralized lending platform. The securities lending process is conducted using the traditional interbank mechanisms that involve the necessary banking and non-banking entities. This process is time consuming and inefficient, and is proving to be a hurdle in the need for developing the market that should ideally have seamless access to such basic functions like securities lending.
The exchange took this opportunity to bring in the promising benefits of the blockchain technology to fill the existing void. As per the press release, this framework will work as a "one-stop-shop for all securities lending activities, permitting access to larger securities volumes within shorter time-frames, even operating in shorter-term positions."
The use of distributed ledger technology will bring in the intrinsic benefits of direct peer-to-peer transactions, launching and executing smart contracts, transparency, automated processing and improved security. It will help the exchange, its various participants, and other involved entities like the custodians in achieving lower costs, higher security and increased market activity.
The project is based on the Hyperledger Sawtooth, an enterprise-level, permissioned, modular blockchain platform that uses an innovative Proof of Elapsed Time consensus algorithm under the Hyperledger umbrella. The joint venture, which emerged in March 2017 among TASE, Accenture and The Floor, also has contributions from chipmaker Intel Corp. (INTC), which provided the necessary Guard Extensions technology to encrypt the transaction data.
The project implementation will follow a phased approach. During phase one, a proof of concept (PoC) will be built. Accenture, with its expertise in technology sector, will lead in project management, systems integration and cybersecurity consulting services. The Floor will provide blockchain expertise.The platform and the pivotal technology may be offered in future to the other global stock exchanges, custodians and other asset management firms.
Defining the initiative as a one-of-a-kind offering, TASE’s CEO, Ittai Ben-Zeev, said, “A safe, cutting-edge, state of the art platform, that was created thanks to a great collaboration among The Floor, Intel and Accenture. The Blockchain technology will present a new level of safety for securities lending and will support growth for transactions based on this new platform. Without a doubt, TASE is now, more than ever before, a global financial innovation leader.” (See also: Russian Bank Completes Bond Blockchain Transaction.)