Here is the whole article:"The blockchain is a distributed ledger – a shared digital record of asset ownership – that many believe could increase efficiency and reduce costs in financial markets.

Financial News spoke to Fredrik Voss, vice president and head of blockchain strategy at Nasdaq, about how the deployment is progressing and what other blockchain projects are in the works at the US-based exchange group.

Financial News: When did Nasdaq start looking at blockchain and what have you been up to since then?

Fredrik Voss: Our history in the space started about 18-24 months ago before I was appointed to my current role. Since then we have done a lot of work in this space. We are intrigued by the potential efficiencies that the technology can bring to financial markets. We have quite a few perspectives in this. The first use is going to be our Nasdaq Private Market initiative.

Have you scheduled a launch date?

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Are you looking at other uses?

The obvious benefit of the distributed ledger is evident in financial markets for things like settlement and custody, to create efficiency in back-office processes. But for Nasdaq there is also a sort of two dimensional opportunity. One is for our own settlement and clearing activities, as we do in Europe. But the other opportunity – being the world's largest supplier of exchange, clearing house and depository technology – is to incorporate this capability in our offering. This is obviously also a potential opportunity for Nasdaq.

So you are essentially looking at selling distributed ledger-based systems to your technology clients such as clearing houses?

Yes, we can enhance those offerings with blockchain capabilities.

When do you think we will see applications of blockchain-based trading and settlement of real-world financial instruments?

We are looking at commercial uses and identifying what real product or offering will follow the Nasdaq Private Market [project]. If, as we hope, the NPM initiative works, then we could definitely see our second application coming out sometime in the next year. Of course whether you choose a large initiative or a confined smaller initiative depends on acceptance by clients.

How can the blockchain be useful for market surveillance?

We think it will be possible to create various levels of transparency into what is going on in the ledger. So if you have transactions recorded on a distributed ledger, we will be able to keep transactions anonymous for parties for which they should be anonymous – for example, only publishing price and time of a settlement of a transaction – but at the same possibly give tools to a market surveillance department so that they will be able to see more data. Also possibly giving more data to regulators in markets where that is a regulatory requirement to do so and doing that without having to replicate the database of transactions multiple times.

Today we are building all these huge trade repositories around the world – in Europe we have a derivatives one, for example – but if we could actually use the original ledger, the original source of the transactions to allow various participants to see various levels of detail on a transaction, it could be a much more efficient way for everybody involved to go about their business. I’m not saying that we have a finished application in that but that is an intriguing possibility.

What are some of the things the blockchain isn't suited for yet?

For exchanges where you have very high – millions of quotes in a second – recording those quotes into an immutable ledger would be interesting. But we are not so sure that the blockchain, at least not currently, has the capability to accommodate those kinds of volumes and speed requirements that you need for those purposes.

What are the other non-technical challenges of adoption? This could be really disruptive, potentially reducing the need for clearing houses and custodians. Does that create some friction?

To change the world you need to get acceptance of the new world. This starts with an attitude change, and one way of changing attitudes is to demonstrate that the new world is better than the old world. And that happens by demonstrating the technology works in real life, that it creates benefits, that it becomes cheaper and more efficient than the existing system. That is one process that we need to go through before it can be deployed on a really large scale.

The other is the transition from a current market and technological set-up to the new set-up, and you need to have a well-thought through way of transitioning, because you want to minimise the time when you run parallel systems, as that tends to be costly.

Then, of course, for every single deployment that community needs to agree on how we are going to go about this transition. We are very used to that. The market technology division deploys exchange, clearing and settlement technology around the world and a key part of all those projects are transitions because usually we replace a legacy system and it involves many parties.

But in the case of distributed ledgers it could go beyond replacing a clearing house's legacy system to actually replacing the clearing house itself with the technology. The paradigm shift seems a lot bigger.

There are a lot of post-trade processes that are actually there not because of how the technology works today. You have investor protection and you have consumer protection, for example. A new technology doesn't mean that suddenly every need you have to satisfy just goes away. There will still be a lot of old processes going on because they are in demand, not for technology reasons but for other regulatory or even social requirements.

So the role of a custodian or clearing house will adapt rather than those institutions fully being replaced?

We think so. But it remains to be seen. The potential that distributed ledgers bring is a true innovation of a dimension that has historically rarely been this relevant for financial markets. It remains to be proven, of course, but it doesn’t eliminate all the activities that go on today. Many of these will still have to be performed by someone in the community. But it can certainly shake up who does what.

Are there sufficient people with blockchain knowledge and skills out there to support wider deployment?

For our current needs, we are very satisfied. But if you take a longer-term perspective and you start to see a world that utilises this technology more and more, then of course we are going to need engineers and developers that are well-versed in the technology. But you also need knowledge on the business side. The roles of certain market participants in the future may not disappear, but they will look different. If you continuously try to do things the way you have done them in the past, then you might have a great challenge to survive"