The Swedish fund market “lacks a central, primary point for registering holdings”

The Swedish fund market “lacks a central, primary point for registering holdings”

Swedish financial services group SEB and Nasdaq are working on a joint project to test a developed prototype for a mutual fund trading platform based on Chain’s blockchain ledger.

The aim is to increase efficiency in the processing of purchases and sales of fund units and to create a unit ledger – an area which they say is full of “manual routines, long settlement cycles and paper driven processes”.

Magnus Haglind, SVP and head of product management, market technology, Nasdaq, adds that the development will benefit individual investors “through faster response from purchases and sales”.

The concept of the project indicates that, by subscribing to a private blockchain, the various market participants – fund companies, distributors and others – will be able to share a distributed database in which all transactions and changes are registered among all participants in real-time.

In addition, the two parties have opened a channel for collaboration with additional interested parties on building a uniformed market infrastructure for Sweden’s fund market.

SEB and Nasdaq say that in contrast to the equities market, which relies on a central securities depository (CSD), the Swedish fund market “lacks a central, primary point for registering holdings”.

According to the duo: “This means that the administration of purchases and sales of fund units are handled through an intermediary or directly with each executing party.

“Since a chain can consist of many links – for example, when a customer via a Swedish bank buys units in a foreign fund company – a relatively large administrative process arises.

“This is handled today through a combination of different technical solutions, including orders placed by paper driven processes and follow-up phone calls.”

Years are here

Both SEB and Nasdaq have shown previous interest in blockchain.

Last year, SEB teamed up with blockchain specialist Ripple to enable SEB customers to make real-time transfers between SEB accounts in Stockholm and New York. The bank described it as “an internal, closed blockchain”.

Also in 2016, Danish blockchain payment service provider Coinify raised $4 million in series A investment round from SEB Venture Capital, an entity within the SEB Group and SEED Capital Denmark.

This year, SIX Swiss Exchange and Nasdaq said they were working with Chain to provide distributed ledger technology (DLT) for SIX’s over-the-counter (OTC) structured products business.

While in May 2017, Nasdaq and Citi’s Treasury and Trade Solutions (TTS) unveiled a new payment solution for automating reconciliation using Chain’s platform.