Described internally as the Massive Autonomous Distributed Reconciliation platform, or Madrec for short, the project led by Swiss banking giant UBS, with help from Barclays, Credit Suisse, KBC, SIX and Thomson Reuters, is designed to make it easier for banks to reconcile a wide range of data about their counterparties.
Traditionally, regulated firms use what are called “legal entity identifiers” that are stored in a global data system to execute transactions on behalf of clients, even if those clients themselves don’t have one of the codes. But as part of a sweeping regulatory change called the Markets in Financial Instruments Directive (MiFID) II, scheduled to go live in the EU on Jan. 3, 2018, all eligible legal entities will be required to have and use these codes.
Instead of mandating that each of these institutions perform these checks independently, though, the banks built Madrec to mutualize much of the effort in a potentially industry-wide reconciliation process hosted in the Microsoft Azure cloud.
In an exclusive interview with CoinDesk, the head of UBS’ blockchain research and development efforts, Peter Stephens, explained how the blockchain infrastructure was designed to help users save money, without sacrificing their competitive edge.
“It will be our first go-live project.”
‘Do no harm’
As part of the build-up to the launch, Stephens took CoinDesk on a tour of the UBS lab in which Madrec was conceived, and described in detail how the blockchain platform could help ease the regulatory demands, even before they begin.
Built over a six-month period, the platform evolved into a smart contract-powered network designed to integrate with identifiers endorsed by The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) and others. The reconciliation of the LEI reference data includes industry classification and information from the European Securities and Markets Authority (ESMA)…