UK: London Stock Exchange launches blockchain platform for private funds

The London Stock Exchange Group (LSEG.L) has launched a blockchain-based infrastructure platform for private funds, becoming the first major global stock exchange to implement such a system.

The platform, called Digital Markets Infrastructure (DMI), covers the full lifecycle of digital assets, including issuance, tokenisation (the process of creating digital representations of real-world assets such as stocks, bonds or private loans on a blockchain), and post-trade settlement. Developed in partnership with Microsoft (MSFT), it runs on Microsoft Azure, LSEG (LSEG.L) said in a statement.

The move comes as big financial institutions seek ways to use blockchain technology, which they say makes issuing, trading, and settling financial assets faster, cheaper, and easier.

LSEG (LSEG.L) explained that the platform is designed to provide interoperability between distributed ledger technology (DLT) and traditional financial systems. This initiative is part of the group’s effort to offer services across the “full funding continuum” for its clients, integrating both digital and traditional assets.

Private funds are the first asset class to go live on the platform, with additional asset classes expected in the future. The platform is fully integrated with Workspace, LSEG’s (LSEG.L) Bloomberg terminal competitor.

MembersCap, a capital management firm, and Archax, a Financial Conduct Authority-regulated crypto exchange based in London, were the first clients to join the platform.

EJF Capital has also been onboarded as an early adopter, and a selection of its funds will soon be available on the platform.

Bill Borden, corporate vice president of worldwide financial services at Microsoft, said: “Together, we’re reshaping the future of global finance to empower our customers to unlock new opportunities and drive meaningful change”.

Blockchain technology, which began in the world of cryptocurrencies, is now being explored by traditional financial institutions, including stock exchanges, banks, and asset managers, as a way to streamline the processes of buying, trading, and managing assets such as stocks and bonds.

For LSEG (LSEG.L), the DMI platform aims to address inefficiencies in private market processes and improve liquidity and investor access to capital markets. Darko Hajdukovic, head of digital markets infrastructure at LSEG, noted the potential to improve connectivity for both digital and traditional assets.

“The onboarding of our first clients and this first transaction are significant milestones, demonstrating the appetite for an end-to-end, interoperable, regulated financial markets DLT infrastructure. LSEG’s position as a convener of markets can bring significant scale to digital assets and effect real change,” he said.

The DMI platform is positioned as a way to improve transparency and access in private market investments, which have historically been difficult to discover and participate in. The launch of the platform could contribute to accelerating the integration of decentralised finance (DeFi) with traditional financial systems.

The LSEG (LSEG.L) has been making a push for innovation under CEO David Schwimmer and is rumoured to also be contemplating 24-hour trading at the London Stock Exchange.

Schwimmer previously told Yahoo Finance UK that while nothing has been decided yet, LSEG is actively exploring the idea.

“We are looking at whether we should be changing our hours. We haven’t made any decisions, and anything that we would do would happen in consultation with the market, our users, and of course, we would work closely with the regulators,” he said. “Nothing has been decided at this point, but it’s something we are certainly thinking about.”

This would require navigating some challenges, including technological upgrades, regulatory considerations, and potential impacts on liquidity and dual-listed companies.

While cryptocurrencies such as bitcoin (BTC-USD) already trade 24/7 and more investors are turning to platforms such as Robinhood (HOOD) to trade shares after hours, stocks listed on the London Stock Exchange remain confined to traditional UK trading hours, running from 8am to 4:30pm.