Blockchain-based SETL plans to revolutionise payment and settlement
A new venture plans to create a multi-asset, multi-currency institutional payment and settlements infrastructure based on blockchain technology.
Called SETL, the venture is backed by Peter Randall, former chief executive at Chi-X, the multilateral trading facility that is now part of BATS, and Anthony Culligan, founder of peer-to-peer bitcoin trading site Roolo. The SETL system will enable market participants to move cash and assets directly between each other, facilitating the immediate and final settlement of market transactions.
SETL will initially focus on FX transactions, but plans to expand to fixed income and funds, then equities and then derivatives. Unlike the blockchain used by cryptocurrencies, the SETL blockchain is designed in such a way that the identity of participants can be requested – an issue seen as key, if the top-tier banks SETL is aimed at are to have trust in the system.
“In financial services, the regulator needs to be able to check real world identities,” said Peter Randall, who is chief operations officer of the new venture. “With SETL, we are dealing with real world currency – all transactions are in central bank money. We deal with identity by having the central bank certify the public key used by each participant and identifying the certifying agent. It is then possible for the regulator to apply to the central bank for the real world identity of any participant.”
Likening SETL to his former company Chi-X, which was part of a wave of alternative trading platforms that contributed to a significant fall in execution costs in the years after 2007, Randall added that the new firm’s approach has some similarities – notably in the way it uses computing to simplify processes.
“When we launched Chi-X, that worked because instead of taking a bunch of manual processes and computerising them, we did it the other way round – we started with the computer, put that at the centre and built the processes around it,” he said. “Reconciliation is traditionally very expensive – you end up having to reconcile multiple times due to differing systems. But the blockchain is a golden record that allows us to do it only once. The potential is enormous.”
The SETL infrastructure has demonstrated speeds of up to 5,000 transactions per second in tests and is expected to reach speeds of 100,000 transactions per second in an enterprise environment, according to the company.