How Switzerland's First Financial Markets Blockchain Was Born

A prototype currently being developed by Six Securities provides one of the first examples of how FMIs are investigating blockchain.

Oct 5, 2016 at 11:21 a.m. UTC
Updated Sep 11, 2021 at 12:32 p.m. UTC
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Six Securities Services logo

A prototype currently being developed by Swiss infrastructure provider Six Securities is just the beginning of its plan to reimagine how operations could be restructured with distributed ledgers.

Built in collaboration with Digital Asset Holdings, the prototype is designed to show how corporate actions (such as the sale of company shares or a change in leadership) could be communicated via the technology. Instead of shareholders being informed via middlemen, a single shared ledger, the firm believes, could near-instantly reflect the changes.

While an early version of the prototype was demoed at Sibos last week, the man in charge of the effort said it is part of a broader effort to investigate how blockchain could impact its role in government and corporate securities.

Six Group head of innovation management, Markus Graf, explained how distributed ledgers could come to impact what the company calls its 'Swiss Value Chain'. Yet, he also spoke about challenges, including sorting through the kinds of big ideas that can be encouraged by blockchain.

Graf told CoinDesk:

"At the moment, we have about 17 different ideas [for] how we could bring certain parts of our four market divisions on a blockchain."

But before the efficiencies of a shared distributed ledger can be built into the Six Securities Swiss Exchange, its securities services, its financial information provider and its payments services provider, Graf said he and his team need to make sure all the possible applications are interoperable.

Sorting through the soup

Six Securities said it has been working with blockchain since last summer when it hired an outside consultant to train its innovation team.

Divided into two groups, half the team (the same group that heads its virtual reality and AI projects) works with each of the company's four market divisions to identify new blockchain products for their customers. The F10 Incubator, on the other hand, is focused externally and focusing on helping finance entrepreneurs incorporate and identify markets.

Graf describes the resulting atmosphere as one where blockchain ideas "pop up" on a regular basis, but that was initially disorganized due to the organic nature of the work.

"In the end you have this soup of different blockchains which doesn’t really help," he said. “Essentially, it doesn’t need to be one blockchain, but at least they should be able to talk to each other."

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Six Securities' Markus Graf

To begin to make sense of all its ideas, Six Securities began work on a private blockchain called Sixchain. The initial effort combined financial information on a blockchain with an exchange-traded derivatives product.

"It worked, it was fantastic, everyone was clapping," said Graf. "It was an aperitif, everyone said it was fantastic. Then someone said, 'What's the value proposition for the customer of Six?' It was a bit like, 'Hmmm, good question.'"

The answer, it turns out, became apparent during interviews with various stakeholders in response to the proof of concept itself: corporate actions.

"We just realized [putting corporate actions on a blockchain] would be easier," said Graf. "But also, when we spoke to customers of Six, especially banks, there would be need for a new kind of product in these areas."

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Six Securities Sibos booth

It so happened that right around the corner from Graf's office, a startup on the verge of being acquired by New York-based Digital Asset Holdings had begun work to help his company.

Founded in 2015, Zurich-based smart contract startup Elevance was already engaged in conversations with Six Securities when it was purchased in April for an undisclosed amount. (As the deal was closing, Six Securities sent a request-for-proposal, to which Elevance and Digital Asset jointly responded).

As part of the deal, much of the Elevance team stayed on to help run DAH’s Zurich offices, and its work with Six Securities continued unabated.

In addition to DAH building a prototype for Six Securities with their own technology, the distributed ledger startup that has raised more than $60m in venture capital is helping its partner lay out a roadmap for how blockchain or another distributed ledger can help Six save its customers money.

Graf concluded:

"This is the main part of the work Digital Asset Holdings is doing with us. Basically, with our architecture and my engineers from our innovation lab, to try to figure out how we will do that in the future."

Images via Michael del Castillo

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