The DTCC's Fear of Missing Out on the Blockchain

Millenials like to joke around about "FOMO," but it was a pillar of the financial services industry that showed it didn't want to get left behind this week.

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Dan DeFrancesco, Deputy Editor, Sell-Side Technology

Dan takes a look at the DTCC's recent white paper discussing how the industry should go forward with implementing blockchain solutions.

No one likes missing out on things.

Whether it's a party, a concert or some kind of great pop-culture moment, most people, especially those under the age of 30, don't like the idea of being left behind.

To that point, the phrase "FOMO," or "fear of missing out," has become popular among millennials. The always educational Urban Dictionary defines it as, "the fear that if you miss a party or an event you will miss out on something great."

With all that in mind, I wasn't too surprised when I saw the Depository Trust and Clearing Corp. (DTCC) released a white paper detailing how the entire industry needs to come together to better understand the proper use cases for distributed ledger technology.

To put it bluntly, the DTCC got FOMO when it came to blockchain technology. Practically any story you read about the distributed ledger talks about how the technology has the potential to disrupt post-trade processes, the very business the DTCC has thrived in for over 40 years.

Pros and Cons

I'll be honest, I was very torn when I initially read the DTCC's white paper. As I read through the DTCC's list of what it believes to be limitations of the blockchain, part of me couldn't help envision an old man yelling at young kids in his neighborhood riding their bicycles too fast by his house.

"Slow down, you guys! The distributed ledger won't be able to save you from everything! You need to reel it back in!"

On the other hand, the old guy has a point. The industry IS too siloed when it comes to solutions using distributed ledger. It does seem like EVERY firm is talking about how they are investing money into the blockchain. Wouldn't it be better if there was a way the industry could come together to work on more focused solutions? As the old saying goes, ‘A rise in tide raises all ships.'

Look no further than the swaps market to understand what can happen when everyone decides to go about it their own way without any oversight. I'm sure if that industry could get a mulligan, they wouldn't be interested in having 23 swap-execution facilities (SEFs).

Now, it seems clear the firms that are able to figure out how to successfully implement blockchain technology have the potential to make a lot of money. It's a big ask to try and get firms all competing with each other to work together on finding a solution. However, if anyone could do it, it's a firm with the experience the DTCC has.

Invested Interest

The thing that bothered me the most about the white paper was the fact that less than a week before it was published it was announced the DTCC was one of 13 financial firms that invested in Digital Asset Holdings. The investment was the first the DTCC has made into a firm that specializes in distributed ledger technology.

For me, it seemed a bit ironic that the DTCC was calling for massive collaboration when it had already hitched its wagon to one specific horse in the race. If I owned a blockchain firm, I don't know how accepting I'd be of the DTCC leading the charge on the development of distributed ledger solutions knowing it has a financial interest in one specific vendor.

Fortunately, I had the opportunity to speak to DTCC chief technology architect Rob Palatnick about this. As you can see in the story, Palatnick made some great points about why there wasn't necessarily a conflict of interest. He also openly stated the DTCC was willing to work with other vendors in the space.

Going forward, I think the DTCC provided plenty of valuable advice in its white paper. After all, when you've been in the space for over four decades you tend to learn a thing or too. So while I don't agree with every word of it, there are lessons to be learned from the paper, even if it was created thanks to a little FOMO.

Food for Thought

-We started a podcast! Every Thursday WatersTechnology US editor Anthony Malakian and I will record a podcast touching on the biggest news stories from the past week, with a few sports, pop culture and political stories tagged on at the end. This week's podcast, which will be posted by Thursday afternoon, will touch on the DTCC's white paper discussed above and Anthony's story on the StatPro-Investor Analytics merger. Click here to check out the first episode, which touched on Bloomberg terminals and work force issues. If you'd like to get updates every time a new episode is posted, subscribe to it here

-The biggest news of the weekend was obviously Winter Storm Jonas. Hopefully, everyone stayed safe and warm. If there is one thing I learned from spending four years of college at a school just south of the Canadian border, it's that a blizzard is nothing to mess around with. Get some wine and fire up the Netflix.

-As much as I like making big statements on here, I am willing to back them up as well. I won't shy away from the spotlight when I'm wrong. I made a pretty strong statement last week about the status of Peyton Manning ─ I believe the term "zombie" was used ─ and I was clearly wrong. So congratulations to Peyton. As a very spiteful Jets fan, I am very happy that he ruined Tom Brady's season. With all that being said, go HEAVY on the Panthers. The future is here, and its name is Cam Newton.

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