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The Depository Trust and Clearing Commission (DTCC) announced October 16, 2018, that its latest study on the feasibility of deploying Distributed Ledger Technology (DLT) in the US equity market returned favorable results.
The DTCC is a United States-based company specializing in post-trade financial and clearing/settlement services to financial markets across the world.
DLT is Capable of Supporting 100 Million Trades a Day: DTCC
According to the DTCC study, DLT is scalable enough to accommodate the day-to-day trade volumes of the United States equity market, which can be more than 100 million trades on an average day. It claims that DLT can process an entire day’s trading, which can peak at 6,300 trades per second for five consecutive hours.
This is somewhat reassuring considering the blockchain scaling problems are soaring at a worrying level as the technology inches toward mass adoption. There is a growing fear that the technology will eventually fail to cater to the demand.
Compared to public blockchains (ones powering cryptocurrencies such as Bitcoin, Litecoin, or Ethereum), which usually peak at a single or double digit per second performance, DLT can process thousands of transactions per second.
Per a blog post announcing the study’s findings, Accenture built a network consisting of more than 170 nodes to emulate the DTCC-supported financial ecosystem of exchanges, brokers, dealers, and market participants.
The press release noted:
“The prototypes were designed to test the capture of matched equities trades from exchange DLT nodes, novation of those trades with DTCC acting as the central counterparty (CCP) to maintain trading anonymity on the ledger, creation of netted obligations and settlement of the trades. The test environment for this study was set up in the cloud.”
A “Benchmark” Study
Conducted by Accenture on behalf of DTCC, the study spanned 19 weeks and used technological assistance from R3 and Digital Asset (DA). DTCC calls it a “benchmark” given the insights the study provides into the possible impact of incorporating DLT in high-volume trading platforms.
Speaking of the significance of the findings, Murray Pozmanter, Head of Clearing Agency Services at DTCC, said:
“We are excited to lead this important work to advance the performance capabilities of DLT and help create new possibilities for leveraging the technology more broadly across financial markets. As an early adopter of DLT, we are encouraged by the results of the study because they prove that the technology’s performance can scale to meet the needs of markets of different sizes and maturity.”
However, DTCC acknowledged that the study should be viewed as a “starting point” as it only examined the necessary functionality. Further studies are required to evaluate DLT’s ability to meet other critical operational requirements such as security, resiliency, and regulatory compliance, to name a few.