London Stock Exchange Group will use blockchain technology to help un-listed businesses make shareholding information more transparent.
It will use hyperledger technology to make the information of small and medium sized private companies digital, which the exchange hopes can give them access to more mature investors.
A small trial will initially begin with Borsa Italiana, the Italian stock exchange. A shared registry of shareholder transactions and records will be held on the blockchain, but only between authorised participants such as issuers, investors and regulators, switching from traditional paper-based trading certificates.
"We are testing the use of blockchain technology in a financial business network where data segregation and confidentiality is vital," said chief operating officer and chief information officer of London Stock Exchange Group (LSEG), Chris Corrado.
LSEG joined the open source blockchain project Hyperledger in late 2015 along with IBM and several other financial institutions. It is also part of the Post Trade Distributed Ledger Group of nearly 40 financial institutions, clearing houses and exchanges such as Euroclear, HSBC and CME Group, working on the technology.
But this is understood to be the first time it has put the technology to the test.
It's not the only exchange experimenting with blockchain. The Santiago stock exchange, Chile's largest and the third largest in Latin America also started working with IBM earlier this year while US operator Nasdaq has been the most active, embarking on several projects, from using blockchain for share trading to payments.
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And IBM is doing its best to get the distributed ledger (DLT) technology into the hands of business and applied in the real world. It launched an accelerator aimed at the banking, logisitcs, manufacturing and retails industries earlier this year. The tech company's head of research Arvind Krishna said it believes the technology applied to logistics, property records and capital markets alone could save $300bn in costs.
"Sharing secure and transparent critical network data across shareholder networks is difficult using traditional system,” said Marie Weck, IBM Blockchain general manager.
“Blockchain is poised to help remove some of these barriers in traditional methods for the transfer of value – much as the Internet did for the exchange of information in the late 1990s.”