UBS Launches Ethereum based MiFID II Compliance Platform


Ahead of the looming new financial regulations in 2018, UBS Launches MiFID II Compliance Ethereum Platform in order to ease the process of reconciliation for banks and other market participants. 

12 December, AtoZForex As we approach the end of the year, many financial services industry participants are getting anxious ahead of the January 2018. The reason being is the upcoming new regulations – Markets in Financial Instruments Directive (MiFID) II. The new financial regulatory framework is about to come into force on the 3rd January 2018.

UBS Launches MiFID II Compliance Ethereum Platform

Ahead of the deadline, some of the biggest banks in the world have launched a pilot to ease the compliance process. Interestingly, the new project is utilizing Ethereum. The new project got a name – the Massive Autonomous Distributed Reconciliation platform, or Madrec. It is led by the Swiss banking giant UBS. Other companies that are taking part in the organization of Madrec are Barclays, Credit Suisse, KBC, SIX and Thomson Reuters.

The key purpose behind the project is to simplify the process of compliance for banks that need to reconcile a wide range of information about their counterparties.

Normally, regulated entities use “legal entity identifiers” (LEI) that are stored in a global data system. The LEI codes are used to execute transactions on behalf of a client. The MiFID II has ordered that all eligible legal entities use these LEI codes.

How will Madrec work?

The solution Madrec provides is to mutualize the effort in the process of reconciliation. The head of UBS’ Blockchain research and development, Peter Stephens, has described how the Blockchain infrastructure would help users to save money, without compromising their competitive advantages. As UBS Launches MiFID II Compliance Ethereum Platform, he has stated:

“It will be our first go-live project.”

Mr. Stephens has also explained how the Blockchain platform could ease the regulatory demands. The platform Madrec is a smart contract-driven network that is designed to integrate with identifiers that are endorsed by the Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) and others.

In fact, the reconciliation of the LEI code data includes industry classification. It also contains information from the European Securities and Markets Authority (ESMA). Thus, instead of every individual company checking the information on its own, and then reconciling the results, the platform can ensure the accuracy in almost real-time.

In order for the project to function, the anonymized reference data is hashed to the Ethereum Blockchain. The data itself is remaining within the particular institution. Then, the smart contracts reconcile the data, which allows users to quickly identify anomalies and reconcile them.

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