Latency, that dirty word.

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We are witnessing much activity around consensus ledgers within the capital markets sector. Many startups are attracting attention and getting funded. Many banks are engaging said startups for proof of concepts and pilot projects. Many research firms are writing about the opportunities and if there ever was a signal that the eco-system has reached critical “hype” attention, most consulting firms are now building their respective practices, anticipating or wishing significant work down the road.

The use cases have so far been focused on post trade activities – clearing and settlement – middle office and back office processes, across a variety of asset classes. There are very good reasons for this. That is where most manual processes can be found which means potential for errors, for lack of transparency, for replication of costs across market participants, for reconciliation nightmares, for tedious and slow post trade processing throughput.

Indeed, the majority of startups that I talk to in this space focus on post trade value propositions. Still, I am starting to see some entrepreneurs aspiring to apply consensus ledger tech to trade and execution. To date i have always viewed these value propositions with skepticism.


The reason is simple. For many asset classes, trading and execution happens at lightening speed. FX or  publicly traded equities are prime examples where trading happens in milliseconds – I am not even touching on the subject of High Frequency Trading. We are all aware of the limitations of the bitcoin blockchain with regards to retail payments use cases – it is very difficult for the bitcoin protocol to compete with the payment networks and systems supporting credit and debit card payments for example. What holds true as a limiter for bitcoin and retail payments also holds true for other consensus ledger tech stacks such as Ripple/Stellar or Ethereum and the trading of various asset classes. Consider how the speed of execution of a trade is inextricably linked to liquidity, buy and sell side market structure and the array of risks – counter party, settlement, technology, default, credit – embedded in every transaction execution.

I expect consensus ledger tech solutions to emerge in the future that will address speed of processing – raw computing, transaction retrieval, consensus algo speed… you name it – in order to address the dirty word/concept Latency as it applies in the capital markets sector in particular and in the financial services industry in general. Mind you, there is a long way to go as current solutions architected around mature database technologies are very efficient.

Regardless, I have a more fundamental question: Is consensus ledger tech a natural fit for trading and execution use cases when it comes to the capital markets sector? Or should we only focus on post trade and settlement?


Pascal Bouvier

Life and work experiences have given Pascal an unmatched vantage point, seeing things as both venture capitalist and aspiring entrepreneur. He currently is a Venture Partner with Santander Innoventures – Santander Group’s Global Fintech fund.

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