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SETL announces blockchain settlement initiative

First Published 27th July 2015

SETL to deploy an institutional payment and settlement infrastructure based on blockchain technology.

Peter Randall, SETL

Peter Randall, SETL

"We are currently in discussion with a number of first tier institutions who are looking to commercialise blockchain technology. Our aim is to be platform, exchange, currency and asset agnostic."

London - SETL has announced plans to deploy a multi-asset, multi-currency institutional payment and settlements infrastructure based on blockchain technology. 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. The SETL system maintains a permissioned distributed ledger of ownership and transaction records, simplifying the process of matching, settlement, custody, registration and transaction reporting.

The initiative is led by Peter Randall, the former CEO and founder of Chi-X, the European equities trading venue, and Anthony Culligan, a hedge fund investor, and CEO and founder of Roolo, a peer-to-peer bitcoin trading site. The SETL management team comprises Anthony Culligan, CEO; Peter Randall, COO; Nicholas Pennington, CTO; and Francois Barthelemy, Head of Corporate Strategy.

The SETL system aims to eliminate some of the concerns raised about the use of blockchain technology for financial markets. These include anonymity, typical for 'permissionless' blockchains such as the bitcoin blockchain, which would present challenges to AML / KYC obligations of financial institutions, and the limited capacity and speed of current blockchains, not designed to handle the required volume of financial transactions. SETL is a real-time, real-world system and will offer connectivity and compatibility with existing work flows, systems, standards and regulations.

With SETL, users will deploy public/private key technology to assert transactions. However, where the bitcoin blockchain is limited to only 7 transactions per second globally, 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. Such speeds are achievable because SETL will operate on a 'permissioned' basis rather than the 'permissionless' environment bitcoin operates in.

The SETL system will require that each public key used is certified by one of a number of entities that will undertake due diligence and will tie each key back to an LEI. This will ensure that regulators and other parties that have a legitimate interest will be able to identify the underlying users. In addition, external parties such as regulators, auditors, issuers and other interested parties will have full real-time transparency of relevant transactions.

Peter Randall, COO, said: 'With SETL, we aim to do to the post-trade environment, what we did to exchange trading with Chi-X. Clearing and settlement processes are fragmented, cumbersome, costly and in need of technological innovation and simplification. We are currently in discussion with a number of first tier institutions who are looking to commercialise blockchain technology. Our aim is to be platform, exchange, currency and asset agnostic. When you have agreed a transaction, SETL will be the way to simultaneously move the consideration and the asset as well as provide a 'golden record' of the transaction.

Anthony Culligan, CEO, added: 'Our industry needs a blockchain technology designed specifically with the requirements of financial markets in mind. Retro-fitting to the bitcoin blockchain using add-ons such as the Open Asset Protocol is a technical non-starter as it does not have the capacity or functionality to properly service financial markets. Understanding how financial markets work has been key to the design process so far. Solutions in the world of finance need to address practical issues such as capital usage, bank liquidity and regulatory permissions. SETL is the product of the decades of financial markets expertise of its founders as well as genuine technical innovation'.