Tony Mackay has a history of disrupting financial markets. Mackay was a key member of the Instinet team that pioneered electronic trading in the ‘90s, and in the ‘00s developed INET (the markets and technology that powers NASDAQ). From 2007 onward, Mackay founded Chi-X, which evolved into the largest pan-European trading center and then expanded globally to Canada, Japan, Australia and Singapore.
Now CEO and co-founder of XBourse Global, Mackay is utilizing distributed ledger technology to again create innovative market solutions that will help businesses of all sizes expand their access to capital.
In the process, XBourse partnered with Digital Asset to develop differentiated market-as-a-service offerings in as little as three months. XBourse’s development team employs Daml, Digital Asset’s open-source smart-contract language, and DABL, a Daml deployment environment.
Here are three ways XBourse is using Daml and DABL to develop the financial market infrastructure of the future:
Raising capital can be an onerous process for businesses. For example, going public can take as long as 18 months and can cost around 10% of the funds raised. It’s no wonder that more than half of private companies abandon their plans for an IPO.
XBourse is democratizing access to capital by allowing companies to create private corporate security issuance platforms for their company. These platforms support secondary trading markets and collateralized loan modules, so companies can build out their own internal markets and digitally connect with investors via investment and loyalty tokens.
“We are building a different version of financial markets that allows businesses to tokenize assets that aren’t easily served by traditional paper flows,” Mackay said. “With XBourse, businesses are free to focus on defining workflows aligned with their business needs, instead of having to worry about the security, reliability and availability of the underlying infrastructure.”
Allan Erskine leads the technology team at XBourse. Erskine’s first project at the company: to build out a private bond issuance platform for a leading resort company. Only a few weeks into the project, Erskine was impressed by how fast he was able to get to market with Daml.
“Daml is a powerful high-level language,” Erskine said. “I can succinctly define my data states and associated parties with just a few lines of code. What’s more, with Daml I don’t have to worry about factors like authorization checks, user-privacy controls, and double-spends. All of these checks happen automatically during compile-time.”
With Daml, Erskine was able to go to market with a private bond issuance platform in a little over three months.
“Daml is a highly secure smart-contract language,” Erskine says. “Daml has a powerful type system that catches large categories of errors prior to deployment. This helps ensure that every transaction on the system is secure and error-free”
DABL is a managed cloud-based offering that lets developers host their Daml applications end-to-end – from the back-end code to the front-end UI.
“DABL takes care of many of our hosting concerns,” Erskine said. “Our system makes use of DABL 'bots' that take care of tasks like managing interactions with the ledger without having to worry about hosting our own customized services.”
Financial assets can be traded many times with many different counterparties over the course of a day. Modern markets consolidate the number of outstanding line items by netting offsetting investors’ trades into a single position at the end of the day.
However, the net delivery of securities or assets versus the net payments for these normally occurs a few days later. This introduces the risk of default into the process — as evidenced by the fall of Lehman Brothers in 2008, the delay involved with settlement can pose a significant risk to investors.
Distributed Ledger Technology will allow investors to verify their trades and reconcile positions in near real time. This could enable trades to be settled on the day of trading – thereby removing a huge element of risk and cost (via margins) to the entire financial system.
Developed with Daml, XBourse’s trading platforms offset this risk by allowing different parties to confirm every trade in a centralized ledger.
“Daml allows us to overcome the limitations associated with traditional blockchain in a very clever way,” Mackay said. “With Daml, we can identify the parties associated with every transaction. We can use Daml to lock in every trade and perform near real time verification and reconciliation at the end of the day ”
Notably, Daml and DABL made it easy for XBourse to build out workflows for different scenarios.
“Daml gives us the flexibility to define workflows where settlements are instantaneous and atomic, and don’t need compression and netting. We can also define separate workflows for bulk transactions.”
Daml is a blockchain-agnostic and open smart contract language. This makes it easy to integrate with private exchanges as well as multi-project open source collaborative efforts like Hyperledger.
“With Daml, we can choose a database solution if that makes sense, or choose to layer over open-source payment and settlement layers, as is the norm,” Mackay said.
Because Daml is interoperable with most of the leading blockchains and new ones, businesses using XBourse should be able to read and write to any blockchain.
“History might not repeat itself,” Mackay said. “But it does rhyme,” with certain patterns emerging again and again. “As we saw in the 1990s, people that adapt to new technologies are the new winners.”
“I firmly believe that the financial industry is ripe for disruption, and Daml is going to be key in making that happen.”
Learn more and download the Daml SDK here. You can also see a DABL demo and learn more here.
For more information on XBourse, please visit https://xbourseglobal.com/