Most stock brokers are aware of the complexities of buying and selling stock on a daily basis. However, trades could process very quickly or they could take days before they settle. With the challenges issues that stock brokers are facing, like outdated technology, the Security & Exchange Commission has taken the first step to improve the process.
The SEC has approved a new US Exchange called the Boston Security Token Exchange ( BSTX ). The caveat to this new exchange is that it has been approved to use Blockchain Technology. The expectation is that this new exchange will process trades much faster because of the speed of blockchain technology.
Blockchain Technology currently possess the fastest processing speed on the internet today. It is the underlying technology that is being used for Bitcoin and other cryptocurrencies.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.
In blockchain, distributed ledgers use independent computers (referred to as nodes) to record, share and synchronize transactions in their respective electronic ledgers (instead of keeping data centralized as in a traditional ledger). Blockchain organizes data into blocks, which are chained together in an append only mode.
With the BSTX employing blockchain technology, the objective is to increase traders settlement time, thereby reducing processing constrictions.
Despite using blockchain, the BSTX will only allow brokers to trade securities such as stocks or ETFs. There was an initial plan to use it to trade tokenized securities, however it was rejected by the SEC. Nevertheless, BSTX plans to eventually expand to cover tokenized securities if approved by the SEC. As for now, BSTX will adhere to the ordinances and guidelines that are currently enforced for traditional exchanges.
