The Impact of the Distributed Ledger Technology on the Financial Industry: Closer Look on the Public Securities' Post-Trade and the Private Equity Market

Abstract

The objective of this research is to provide the reader an overview of the distributed ledger technology (DLT), its fundamental challenges, the current and potential future uses in the financial industry, and to suggest future fields of the topic to be researched. The first task of this thesis is trying to answer, “how will the distributed ledger technology impact the financial industry”. Although the thesis will not cover exhaustively all the financial industry’s needs towards the distributed ledger technology, it will give an overview of the DLTs probable usage in the industry. By reading the thesis and especially its use cases from the fields of private equity, and settlement and clearing of public securities’ trading, the reader should get a more accurate answer to the secondary question “how can the public securities and private equity markets use distributed ledger technology in the near future”.

The question about the distributed ledger technology’s impact on the whole market is complicated. Despite the amount of financing this technology has acquired in the recent years, there are no new, disruptive or widespread usages for the DLT in the financial industry. However, it is expected that during the next five years, the DLTs become reality. This is due to their enormous potentiality in security, efficiency and automation, which all could save the financial industry up to 50% of their current costs. Additionally, during the same time period, it is highly expectable that some financial service applications, basing on the DLT, will be presented for the consumers by the players from outside the traditional markets. To answer the secondary question, the both markets will face significant changes during the upcoming years: public securities’ post-trade processes will benefit from the more secure and rapid settlement, whereas the private equity market’s whole nature can become a more accessible for both the investors and the businesses seeking for financing.