News surfaced of a major collaboration between several European banks and regulators that would use blockchain technology to issue financial warrants. The system, called Fast Track Listing, would allow entities to grant agreements on options to buy their stock, similar to option calls, through recording the contract on a blockchain ledger.
The eight organisations involved — banks Société Générale, CaixaBank, Commerzbank, Santander, BBVA and BNP Paribas; the Spanish National Securities Market Commission (CNMV); and stock market firm BME — are said to have completed a proof-of-concept design that could reduce the time required to issue warrants by 70% and simplify the entire process, according to a statement released by the CNMV.
Self-issued Options Contracts
Financial warrants are very similar to options contracts, where an agreement is entered into by two or more parties that allows one party the right but not the obligation to purchase a financial asset at a given time for a given price. The speculator essentially pays a market premium for the ability to purchase a stock in the future at a set price, which when combined with other trading instruments means he can stand to make a profit if the asset declines or increases in price. Financial warrants are almost identical to options, but they are issued directly by the company which the stock relates to.
Given the rule-based nature of smart contracts and blockchains, this is an obvious link to futures contracts. For this reason, the CNMV says it will be pursuing further research in the applications of blockchain technology.