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Risk & Compliance Magazine Publishes Servidio Article on Blockchain Technology

June 7 , 2017

A column co-authored by securities and capital markets partner John Servidio describes the advantages — and limitations — that distributed ledger technology, also known as “blockchain,” can offer to securities and derivatives traders is featured in the latest edition of Risk & Compliance magazine.

The article, titled “Blockchain Buzzkill: A Closer Look at Distributed Ledger Technology,” notes the growing hype surrounding the financial technology that records transactions in cryptographically secure blocks held on seperate ledgers distributed across server networks. The technology, perhaps best known for supporting the cyber currency Bitcoin, has the potential to revolutionize trading.  As a result,  global financial institutions and fintech startup ventures have invested millions of dollars into research and development for blockchain and similar distributed ledger platforms. 

Servidio, who is based in New York, wrote that the buzz surrounding blockchain technology is deserved. It can condense the execution, clearing and settlement securities and derivatives from several days to minutes or even seconds. Blockchain and other distributed ledger technologies require no intermediary or trusted central party, can offer transparent and permanent records, and open the prospect of “smart contracts” that could automate dividend payments, process corporate actions and exchange collateral contingent upon certain agreed-upon conditions.

“[B]lockchain technology can reduce some operational risks and help market participants comply with certain regulatory requirements,” the column concludes. “But blockchain will not resolve the biggest challenges traders face: credit risk, cybersecurity risk and legal risk. Blockchain is buzzworthy, but it will not kill the biggest risk categories.”

To read the article in the spring 2017 issue of Risk & Compliance, click here.