What is believed to be the first blockchain-based structured product has become the latest innovation to emerge from the Financial Conduct Authority’s regulatory sandbox.
Structured finance boutique Marex Solutions has created a structured product it claims is the first to be registered, transacted and settled using blockchain technology.
The product, a two-month 100% capital protected note linked to the iShares Core FTSE 100 exchange traded fund, is designed to introduce transparency into the previously obfuscated world of structured product pricing. The aim is also to strip away some of the intermediaries needed for product design and distribution, in order to cut costs.
It was developed in partnership with structured product platform Chartered Opus. It was then connected to the Ethereum blockchain by Nivaura, which provides automated pricing, issuance and administration, and distributed through ResonanceX, a platform for high net worth and qualified investors to access tailor-made investment products directly.
The product has come out of the FCA’s regulatory sandbox, designed to encourage innovation in the industry, which ResonanceX is currently operating out of. Marex has also launched a parallel conventional product through Clearstream.
ResonanceX CEO Guillaume Chatain said: ‘With this first ever blockchain issuance conducted in parallel with a traditional issuance via Clearstream, we’re not only demonstrating that our fully automated multi-dealer platform is well integrated within existing capital market systems, but that we are committed to use technology and the benefits of decentralisation to further reduce production costs.
‘This will ultimately translate into lower minimums and better economics in the structured products ResonanceX will distribute.’
The product will pay out a contingent coupon of 13% annualised if the index closes 2.5% above the initial level at maturity, otherwise investors will simply receive their money back. The amount raised for the product has not been disclosed.
Marex Solutions CEO Nilesh Jethwa added: ‘Technology is disrupting traditional finance by allowing niche specialists to take the place of larger organisations. By being able to provide these products more cheaply, quickly and securely will, we believe, raise the bar for