Introduction
Financial Markets cover Capital Markets, Money Markets, Commodity Markets, Forex Markets, Derivative Markets, Crypto-Currency Markets, Futures Markets etc.. Capital Markets are markets for long-term securities, including the stock market and the bond market dealing with equities, bonds, mutual funds including ETFs, and credit markets. Money Markets cover short term (less than one year) borrowing. These along with the attendant markets are the way to invest in enterprises, so that funds from investors are put to productive use in Enterprises. Mechanisms to hedge or leverage the risk of this exposure for both Enterprises and Investors are also available through these Markets.
Why should this group be launched?
We have a Trade Finance SIG in Hyperledger. Trade Finance deals with financing international and domestic trade primarily by banks. There is exposure to the primary documents connected to trading of goods and services.
On the other hand, the Financial Markets SIG will focus on Markets which deal in securities that are fungible, open, regulated heavily and have a lot more flow and participation. This large vertical is not currently covered by any SIG in Hyperledger. Please see the scope section below to get a better feel for the Financial Markets proposal.
Scope
The Financial Markets SIG will study how Hyperledger DLTs should interact with Financial Markets use cases. From issuance and trading of all instruments (primary market) to secondary markets for the continued market-making, dispersal of risk and other activities; regulation; capital requirements; traceability, pre-trade analysis and valuation; post-Trade settlement with custody and bookkeeping. Are there architecture, identity, performance related considerations specific to Financial markets and DLTs. These are questions to be answered by this SIG. In the beginning we attempt to develop a taxonomy of the domain by viewing it in a couple of dimensions.
We will not discuss digital currencies nor money supply. No macro economic or general policy discussions. Payment systems remain a question mark. Retail banking also a question mark. Even if we do not discuss these, we may have to build bridges to them.
Just like the Healthcare SIG, this might have a number of sub-groups to be decided by the participants and by the natural subdomains, but the Financial Markets SIG can remain the overall umbrella over these sectors. The use of DLTs which is a collaborative and unifying technology can also knit together these subdomains under the Financial Markets SIG.
What are the oracles (external sources) needed, pricing/market data, analytics- rules and regulations, continuous KYC and other concerns and emerging trends are the domain of the Financial Markets SIG.
Work Products
The anticipated initial work products will include (but is not limited to):
Develop a simple taxonomy of Financial Markets; first concentrating on the flow and fungibility of securities (bonds and stocks generalized to derivatives, futures and currency markets) ; issuance, trading, settlement, custody and corporate actions (payment of dividends, buy backs etc).
Collaborators (other groups):
Performance and scale WG to look at generating benchmarks in the Financial Markets phase. What are the architectural implications (architecture WG). Banking & KYC with IDWG. Look at already developed use cases in this sector in Hyperledger DLTs (Fabric, Sawtooth, Iroha, Quilt, Burrow). Collaborate with the Public Sector SIG for getting a window into Financial Markets regulation.
Look at the work being done by the Trade Finance SIG which covers a specific sector of the financial markets.
Interested Parties:
The following individuals have already expressed an interest in joining this SIG, and we hope they will become contributors over the first year:
List of interested parties listed with their consent, including name, association, and optionally email addresses.
Vipin Bharathan, dlt.nyc is proposing this SIG. He has more than 25 years of experience in Financial Markets implementing and running front-to-back systems concentrating on Risk and P&L systems, now working on applied DLT.
Jonathan Levi, (HACERA, The Unbounded Network), who transitioned his banking career to focus on decentralized and distributed systems, also in highly regulated markets.
Silvan Villiger, Digital Asset
Proposed Chair
The following individual(s) have volunteered to serve as the initial Chair/Co-Chair’s of the SIG:
- Vipin Bharathan.
NOTE: As part of this proposal, the Hyperledger SIG working processes as described here will be followed: https://wiki.hyperledger.org/groups/sig-application