The Massive Autonomous Distributed Reconciliation platform, or Madrec for short, is the project led by the Swiss banking giant UBS, with the help of Barclays, Credit Suisse, KBC, SIX and Thomson Reuters, and is designed to make it easier for banks to reconcile a wide range of data on their counterparts.
Traditionally, regulated companies use what are called “identifiers of legal entities” that are stored in a global data system to execute transactions on behalf of clients, even if those customers do not have one of the codes. But as part of a broad regulatory change called the Financial Instruments Market Directive (MiFID) II, scheduled to go live in the EU on January 3, 2018, all eligible legal entities must have and use these codes.
The head of UBS’s blockchain research and development efforts, Peter Stephens, in an exclusive interview with another communications medium, said:
“The blockchain platform could help alleviate regulatory demands, even before they start”
Built over a period of six months, the platform became an intelligent contract network designed to integrate with identifiers backed by the Regulatory Oversight Committee of Legal Entity Identifiers (LEI ROC) and others. The reconciliation of the LEI reference data includes the classification of the industry and the information of the European Securities and Markets Authority (ESMA).
Instead of each company verifying the information independently and reconciling the results periodically, blockchain intelligent contracts will guarantee accuracy in near real time.
To do this, the anonymized reference data is transferred to the Ethereum blockchain, while the source data itself remains within the institution. Smart contracts reconcile the data, allowing users to quickly identify anomalies and reconcile them.
Given that all eligible entities will be subject to those same standards, Stephens argues that helping each other to ensure the accuracy of their work will only have a positive impact on their final results, leaving room for competition elsewhere.
“It’s public reference information, it’s not a competitive differentiator,” Stephens said.
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