The Blockchain technology that promises to offer transparency and simplicity to finance is now entering one of the most obscure corners of the industry. Marex Solutions that is based in London created what it says is the first structured product to be cleared, settled and registered using the distributed ledger technology underneath Bitcoin.
According to a term sheet, the 2-month pound-denominated notes pay a coupon of up to 13%per year depended on the FTSE 100 Index’s performance. Marex denied revealing how much was sold to retail investors in the private placement that was held on Friday.
The Marex notes commit to returning investors principal no matter the outcome. This was made possible with the capital protection backed by a loan agreement between the issuer and Marex Financial Ltd.
The chief executive of Marex Solutions (a Marex Spectron Group Ltd.’s division), Nilesh Jethwa said in an interview that It’s allowed them to utilize a product that was before the exclusive domain of global custodians and several investment banks. He further said it is the first time that a team of guys who are niche specialists in their space is able to work together to create something which is not only as good as the investment banks are producing, but it is actually superior.
Companies are experimenting with the technology in different markets
According to Jethwa, the Ethereum blockchain technology is able to help make structured notes safer, faster and cheaper. It promises to remove intermediaries that have usually participated in the settlement process, possibly reducing the fees charged to investors. The time required to complete trades can be reduced from two days to minutes, or even seconds, decreasing the same time the possibility of settlement failure and human error.
In addition, exchanges, fintech firms, and banks are experimenting with the technology in several markets. Lenders including JPMorgan Chase & Co. and Goldman Sachs Group Inc. completed a successful 6-month test using blockchain technology in the $2.8 trillion equity-swaps market. Also, the Canadian Securities Exchange aims to create the first clearing house of North America based on the technology. Finally, Central banks will eventually take advantage of blockchain to settle interbank fund transfers, according to the Ripple’s CEO, a San Francisco-based provider of the technology.
Will other organizations adopt the innovation anytime soon?
According to Marex CEO, it might be years before other issuers, such as Wall Street banks adopt the innovation for their own products. So far, no bank has been able to do this, despite the fact that blockchain has been around for years.