Blockchain technology is set to be applied to stock collateral loans. Application of blockchain technology on new areas is becoming more visualized.
According to industries, KOSCOM has started PoC (Proof of Concept) process to apply blockchain technology to stock collateral loan process of stock firms. It is planning to provide its service between January and February of next year.
KOSCOM is planning to allow stock firms and investors to check changes in prices of stocks that they put as collaterals in real-time.
Required collateral maintenance rate is the most important factor for loans that have stocks as collaterals. Usually, stock firms calculate this rate based on daily closing price. If values of stocks that are deposited as collaterals plunge due to sudden downward trend, stock firms reduce further damage through liquidation to maintain required collateral maintenance rate.
KOSCOM is planning to allow stock firms and investors to immediately check whether liquidation is taking place whenever values of collaterals drop. When its service is commercialized, it will be possible to check which stock firms borrowed stocks from other stock firms and which stock firms borrowed investors’ stocks and whether they were used for short stock selling.
“We are still in a process of developing relevant technologies.” said a representative for KOSCOM. “By establishing a blockchain platform for capital markets, we are planning to apply it to other areas such as fund positive sales contract that finished PoC process and unlisted bond transactions.”
Entire capital market such as Korea Securities Depository (KSD) and Korea Financial Investment Association (KOFIA) is also starting to expand areas where blockchain can be applied. Blockchain-based authentication system called ‘Chain ID’, which was introduced by KOFIA, is now able to actually sign orders in addition to balance inquiry. KSD is also looking into applying electronic voting system for general meetings of stockholders through blockchain technology.
“Because stock firms especially have well-established systems, it is difficult for them to make profits even if they apply new technologies to their main systems.” said an IT representative for a stock firm. “Due to lack of profitability, many stock firms are starting to apply blockchain technology to areas where IT systems were not applied before.”
Actually, mainframes of banks or stock firms have been developed based on products and have different development period and software as a result. There are also many companies that have more than 20 core banking systems. As a result, they are looking into advantages of blockchain technology with their new businesses at the center rather than restructuring entire system.
Staff Reporter Ryu, Geunil | ryuryu@etnews.com