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LSEG teases “blockchain” exchange: So many questions...

"Putting trading on the chain makes little sense since you fragment liquidity and get worse spreads..."

LSEG blockchain exchange plans are yet to be fully revealed

London Stock Exchange Group (LSEG) says it is exploring building a comprehensive blockchain-based trading venue – with Murray Roos, head of capital markets, telling the FT that it has reached an “inflection point."

Roos said the LSEG would, if the exchange operator can proceed, be the first large global stock exchange to offer an “end to end” blockchain-powered ecosystem. LSEG was “definitely not building anything around cryptoassets" he added, in an FT interview somewhat thin on details.

LSEG declined to answer a series of specific questions from The Stackresponding merely by email that the exchange “plans to build an end-to-end digital market ecosystem that will allow for the raising and transfer of capital in a more seamless, cost efficient way across asset classes."

LSEG blockchain exchange: What does "end-to-end" mean?

Roos had told the FT that if they come to fruition, LSEG's plans would make it the "first large global stock exchange" to offer such an end-to-end blockchain-based trading ecosystem.

A key question is whether "end-to-end" means that LSEG plans to try to conduct trade matching over a distributed ledger.

One senior exchange official with experience in the sector (declining to be named given their lack of intimate familiarity with LSEG's plans) told us that “putting trading on the chain makes little sense since you fragment liquidity and get worse spreads. Apart from that, it’s useless for high-frequency traders because the chain simply cannot process as quickly as a low or ultra-low latency exchange.  So a blockchain-based trading capability is a theoretical nonsense outside of the pure digital (read crypto for the moment) world, where retail investors don’t know or don’t care that transactions can take minutes or hours to complete.”

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