Santiago Stock Exchange Boldly Steps into LatAm’s First Major Blockchain Deal

In a bold new deal, the Santiago Stock Exchange is adopting new blockchain technology from IBM to streamline the management of short sales, marking the first major implementation of the technology in the region.

santiago stock exchange

Chile is on the verge of transforming its regional equity market, with the Santiago Stock Exchange (SSE) (Spanish: Bolsa de Comercio de Santiago) implementing a new blockchain system from IBM – another example of the Nearshore’s progressive approach to new technologies.

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“This is the first real implementation of blockchain in both Chile and in Latin America,” Francisco Thiermann, General Manager at IBM Chile, told Nearshore Americas. “For the SSE, this first step will enable them to grow the equity market in Chile and eventually other countries in the region.”

Why Blockchain?

This new blockchain solution is being implemented into the SSE’s repository for short sales in order to drastically reduce the intensive manual workflow that traditionally comes with managing them.

Due to the massive amount of work associated with them, today’s short sale transactions in Chile only represent 1% of the local equity market – for a market that trades approximately $200 million per day, that’s fairly small, but the expectation is that this new blockchain system will significantly increase that.

Andres Araya, CIO, Santiago Stock Exchange: “It’s a way to prove blockchain’s potential.”

“This will be a real showcase of what blockchain is capable of,” said Andres Araya, CIO at the Santiago Stock Exchange. “It’s a way to prove to regulators, to intermediaries, and to ourselves, that blockchain can streamline current processes and has the potential to be scaled up to larger projects.”

Practical Implications

IBM and the SSE are first building a team in Baton Rouge, Louisiana, to work directly on this project. They will start off with just 12 people, including developers, business analysts, and QA testers from both companies.

Neither spokesperson could disclose the costs involved in the process due to contractual obligations.

The SSE expects to put this solution into place, parallel with the current workflow practices, by the end of this year. By 1Q18, the intention is to move over to blockchain 100% for short sales in Santiago.

The fact that nothing of its kind has before been implemented to solve this issue gives Chile’s equity market a significant head start with the tech.Nexus 2017 Banner 2

Regional Expansion of Blockchain

Alongside its own local implementation, the SSE is analyzing how to expand the system with its partner countries in MILA, a program that integrates the stock exchange markets of Chile, Colombia, Mexico, and Peru.

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The goal is to create a central counter party (CCP) to compile and manage the assets that are traded between these countries.

“By 2018, we should be working with them to implement this solution, but we first need to prove that it works — adoption is the biggest challenge here,” said Araya.

Thiermann sees blockchain as being able to “do for secure transactions what the internet did for information”, making this an important project for IBM.

Francisco Thiermann
Francisco Thiermann, GM, IBM Chile: “Clearly, there’s aggressive growth on the way.”

“From a global perspective, more than 60% of banks are working on internal blockchain projects, with IBM forecasting that the market will be worth $2.3 billion by 2021,” he said. “Clearly, there’s aggressive growth on the way.”

No Task is without its Challenges

Before full implementation, the SSE needs to persuade intermediaries and regulators to accept this as a step forward, instead of being held back by the perceived complexity of the tech.

“Getting the regulators and partners on-board is difficult, so we’ve had to present the benefits of blockchain and make it easy to understand,” said Araya. “We also have to prove blockchain’s capacity to scale, with more volume, more participants, and more nodes. The system will start off on our own servers in our own data centers in Santiago, but we want to test it in the cloud too, which will present a challenge.”

By dipping its toe in the water and testing a new blockchain technology, the Santiago Stock Exchange is showing that Latin America is not afraid to take bold steps toward future technologies, once again proving that nearshore nations are ready to step up their game.

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