Distributed ledger technology can support trading volumes in US equity markets, according to the Depository Trust & Clearing Corporation (DTCC).
Its benchmark study, which was conducted by Accenture with additional support provided by Digital Asset and R3, showed that DLT can perform at levels necessary to process an entire trading day’s volume at peak rates, which equates to 115,000,000 daily trades, or 6,300 trades per second for five continuous hours.
Currently, public blockchains supporting cryptocurrencies operate at single or double digit per second performance, which until now was the only indication of the potential volume that a private DLT might be able to support.
Before everyone gets carried away, we should point out that the study provided a starting point and only tested basic functionality. The DTCC admits that additional work will be necessary to determine if DLT can meet the resiliency, security, operational needs and regulatory requirements of its existing clearance and settlement system.
Digital Asset and R3
During the 19-week study, DTCC and Accenture ran performance tests using commercial DLT platforms offered by Digital Asset (DA platform) and R3 (Corda platform), whose engineers provided support on performance tuning. The main objective was to analyse DLT’s ability to process the massive trading volumes of the US equities market, not the capabilities of individual commercial platforms.
Accenture built a network of more than 170 nodes to model the financial ecosystem of exchanges, market participants and broker/dealers supported by DTCC. The prototypes were designed to test the capture of matched equities trades from exchange DLT nodes, novation of those trades with DTCC acting as the central counterparty (CCP) to maintain trading anonymity on the ledger, creation of netted obligations and settlement of the trades. The test environment for this study was setup in the cloud.
“This project answered key questions and built serious confidence in blockchain’s ability to drive large scale transformation,” says David Treat, Managing Director, Global Blockchain Lead, Accenture. “The close collaboration with the DTCC and our alliance partners, Digital Asset and R3, enables us to push DLT performance to new levels against real world requirements and conditions.”
“DTCC has been actively involved in DLT projects for over three years and during that time, we have seen technology platforms continue to mature, but concerns have loomed around the scalability of DLT,” states Rob Palatnick, Managing Director of IT Architecture at DTCC.
“This study is a natural next step in our efforts to advance the use of DLT, and we look forward to continuing to work collaboratively with the industry to identify new opportunities to use the technology to enhance the post-trade process.”