Capital Markets SIG Proposal

Introduction

Capital Markets are a way to connect investors and borrowers for long term provision of capital. A way to invest in enterprises, so that funds from investors are put to productive use. Investors or lenders can be individuals or other entities.  Borrowers are companies and governments. Although the term market applies to exchanges and associated infrastructure; financial intermediaries like banks connect the various parties together. Investors are compensated directly by borrowers or are rewarded by appreciation of long-term securities. Capital Markets include the stock market and the bond market dealing with equities, bonds, and credit markets. They can also include derivatives.   

Why should this group be launched?

This large vertical is not currently covered by any SIG in Hyperledger.  Finance is the Ur Use Case for blockchain.

We have a Trade Finance SIG in Hyperledger. Trade Finance deals with financing international and domestic trade primarily by banks. There is exposure to the primary documents connected to trading of goods and services. On the other hand, the Capital Markets SIG will focus on Markets which deal in securities that are fungible, open, regulated heavily and have a lot more flow and participation. Please see the scope section below to get a better feel for the Capital Markets proposal.  

Scope

The Capital Markets SIG will study how Hyperledger DLTs interact with Capital Markets use cases.  From issuance and trading of instruments to continued market-making, dispersal of risk ; program-trading; regulation; capital requirements; traceability; pre-trade analysis and valuation; post-Trade settlement with custody; bookkeeping and corporate actions; repos. Are there architecture, identity, performance related considerations specific to Capital markets and DLTs. These are questions to be answered by this SIG. In the beginning we attempt to develop a taxonomy of the domain by viewing it in a couple of dimensions.

We will not discuss commodities and currency markets; although there are integration points with respect to hedging.  No macro economic or general policy discussions. Payment systems remain a question mark. Retail banking also a question mark. Even if we do not discuss these, we may have to build bridges to them.

Just like the Healthcare SIG, this might have a number of sub-groups to be decided by the participants and by the natural sub-domains, but the Capital Markets SIG can remain the overall umbrella over these sectors. The use of DLTs which is a collaborative and unifying technology can also knit together these sub-domains under the Capital Markets SIG.   

What are the oracles (external sources) needed, pricing/market data, analytics- rules and regulations, continuous KYC and other concerns and emerging trends are also the domain of the Capital Markets SIG.

Work Products

The anticipated initial work products will include (but is not limited to):

Develop a simple taxonomy of Capital Markets; first concentrating on the flow and fungibility of securities (bonds and stocks) ; issuance, trading, settlement, custody and corporate actions (payment of dividends, shareholder communications, buy backs etc).

Collaborators (other groups):

Performance and scale WG to look at generating benchmarks in the Capital Markets phase. What are the architectural implications (architecture WG). Banking & KYC with IDWG. Look at already developed use cases in this sector in Hyperledger DLTs (Fabric, Sawtooth, Iroha, Quilt, Burrow).  Collaborate with the Public Sector SIG for getting a window into Capital Markets regulation.

Look at the work being done by the Trade Finance SIG which covers a specific sector of the financial markets.

Interested Parties:

The following individuals have already expressed an interest in joining this SIG, and we hope they will become contributors over the first year:

List of interested parties listed with their consent, including name, association, and optionally email addresses.

Proposed Chair

The following individual(s) have volunteered to serve as the initial Chair/Co-Chair’s of the SIG:

1. Vipin Bharathan.
   

NOTE: As part of this proposal, the Hyperledger SIG working processes as described here will be followed: https://wiki.hyperledger.org/groups/sig-application