Goldman Sachs And Citigroup Accomplishes Equity Swap On Axcore Blockchain
Two of the biggest multinational investment banks across the globe, Goldman Sachs and Citigroup, lately carried a successful transaction employing the blockchain technology. Both titans made the first of its kind equity swap, but 13 more are remaining to be achieved, as well.
Equity Swap On Blockchain
Citigroup and Goldman Sachs finished the successful transaction on January 28th. What makes this equity swap distinctive is the used platform named Axcore blockchain, which came from venture-backed distributed ledger startup Axoni. Similar to Ethereum’s network, Axcore also enables the deployment of smart contracts.
The distributed ledger (blockchain) technology grants an excessive number of advantages, which came handy while the equity swap transaction. It enables every counterparty in every swap to see and use the same data, unlike the traditional equity swaps.
According to Greg Schvey, Axoni co-founder and CEO, blockchain technology can agitate the financial sector, and this is a big first step:
“The ability to have synchronous, peer-to-peer processing of data between institutions and have databases natively speaking to each other is just a huge, huge first step towards the future that I think a lot of people have been looking for in capital markets infrastructure. And for these huge firms that we are working with – and then I would argue for probably most of the world – this is a pretty substantial advancement toward that path.”
It’s worth heeding that back in 2017, Citigroup engaged in Axoni’s Series A funding round, which raised over $20 million. Earlier, NEX Group, Wells Fargo, and F-Prime Capital were amongst the other major companies that funded in the blockchain-based startup.
How Does Blockchain Boost Equity Swaps?
Traditional equity swaps have to be updated continuously for myriad variables. These comprise different interest rates, corporate actions such as dividend payments and stock splits, and end-of-day market prices. Financial institutions need to engage diverse people to confirm the process until the conclusion of the swap, which in some cases, could take months.
Additionally, conflicts occur frequently since every counterparty in a trade manages its records. Consequently, the necessary time to perform a transaction requires lots of human resources and hours, according to a recent report by the ‘International Swaps and Derivatives Association’ (ISDA). It concludes that if there are 2% disagreements, it could deliver up to $2 million in losses per transaction.
Schvey believes that his company’s blockchain technology can give the primary instrument to solve these expensive and time-consuming issues.
Also chatting on the matter was Puneet Singhvi, Citi’s head of financial market infrastructure and blockchain lead. He pointed out that technology is superseding the unnecessary hours and expenses of running manual verification processes:
” These are large operational teams, spending a considerable amount of their time just figuring out where things went wrong. What you are replacing is phone calls, Excel spreadsheets, emails, etc. If you have disputes, the sooner and concerned continuously you are, the less risk you have from an operational and financial perspective.”