Japan’s Largest Securities Firm Joins Leading Think Tank to Study the Blockchain for the Securities Industry

The leading Japanese think tank and systems integrator, Nomura Research Institute (NRI), recently announced an upcoming research project on the feasibility of implementing new technologies, including blockchain, into the securities industry.

NRI was created as a merged entity of Nomura Research Institute, Japan’s first private think tank, and Nomura Computer Systems, a pioneer in systems. “Our aim is to double operating profit to ¥100 billion by creating value,” states the 2015 NRI Integrated Report.

Beginning this month, research will be conducted in collaboration with the biggest security firm in Japan, Nomura Securities Co Ltd, along with other technology startup firms, and consultants from multiple departments of NRI.

“The unique value created by the merger of existing business with advanced technologies and services provided by new ventures, such as blockchain, is a large area of interest for the financial services industry in Japan and worldwide.”
— – Nomura Research Institute

NRI was recently ranked number nine on the American Banker and BAI FinTech Forward Rankings of the top 100 technology providers to U.S. banks. IDC Financial Insights FinTech names it as a top 10 firm in the 2015 rankings, which measures the health of the global technology market for all financial services sectors. By comparison, Equifax ranks 17th and Ingenico ranks 26th.

Brave New Coin spoke with NRI manager Yasuo Togawa, who explained the significance of studying the blockchain for the securities industry, which has different policies and regulations in comparison to the banking industry. While blockchain Proof of Concepts in the banking industry may have been conducted widely, “none has gone public in the securities industry, particularly in Japan,” Togawa stated.

“We imagine there are possibilities that we can make management practice of securities more efficient with the technology.”
— – Yasuo Togawa, NRI Manager

This research will explore various possibilities without discounting any cryptocurrencies, Togawa explained, and the NRI plans to “search widely.” The study should be completed in January 2016, and the results will be then examined for practical application opportunities.

NRI is the largest Japanese consulting and IT consulting firm, offering services in diverse areas of asset management, insurance, securities, banking as well as distribution and manufacturing.

NRI’s key research partner, the Tokyo-based Nomura Securities, is the oldest brokerage firm in Japan and boasts the largest market share of accounts in the Japanese market.

With 159 branches and about ¥109 trillion in client assets, as of March 31, 2015, the company holds 5.29 million client accounts with balances, representing 23% of all securities accounts in Japan.

The newly announced blockchain research is not the first that the organization has conducted; the giant think tank started an internal project last year to study the technology. While unable to disclose many details of the current project, due to obligations and agreements with external partners, Togawa was able to share some details of NRI’s previous project.

“We have done work on blockchain technology before this project, but it was internal. This is our first time to collaborate with external companies regarding a [Proof of Concept] project on blockchain technology. We have tried to find how we can utilize block-chain technology to apply business activities.”
— –  Togawa

The investigation covered many areas, and various digital currency trends were observed. However, the bitcoin trend rose above others as the main outcome of the internal research. “The impetus behind creating this study emerged from NRI’s continuous commitment to promote open innovation, based on the understanding that the financial and technology sectors are becoming increasingly linked."

While there has not been a great deal of research conducted by Japanese companies, applying blockchain technology to the securities industry has been looked into extensively elsewhere.

In May, Nasdaq, the second-largest stock exchange in the world by market capitalization, announced a blockchain project, making it the first high-profile exchange to publically announce exploration into the blockchain for use in financial markets. Nasdaq’s blockchain-enabled digital ledger technology is expected to debut later this year, and the first application will be to expand the equity management capabilities offered by its Nasdaq Private Market platform.

“Our initial application of Nasdaq’s blockchain technology-enabled offering will modernize, streamline and secure typically cumbersome administrative functions, and will simplify the overwhelming challenges private companies face with manual ledger record-keeping.”
— – Bob Greifeld, Nasdaq CEO

In the same month, the New York Stock Exchange, the world’s largest stock exchange by market capitalization, also jumped on board with the launch of the first exchange-calculated and disseminated bitcoin index (NYXBT). This Index represents the U.S. dollar value of one bitcoin unit based upon actual transactions occurring on select bitcoin exchanges, initially Coinbase Exchange which the NYSE also has a small investment in.

"Bitcoin values are quickly becoming a data point that our customers want to follow as they consider transacting, trading or investing with this emerging asset class."
— – Thomas Farley, NYSE Group President

Swiss megabank UBS announced in September that they were investigating the use of blockchain technology to shorten the settlement time, by creating a “utility settlement coin.” This could allow trades to settle instantly instead of the usual three days. The banking giant has also been investigating using “smart bonds,” on the blockchain for instantaneous settlement, that could lower both costs and operational risk.

Coincidentally, NRI announced that it will begin providing its prime settlement service for post-trade processes to UBS Securities starting in November. Initially, it will be used only for Japanese equities bonds, but will expand to Non-Japanese equities and bonds trades in Summer 2016.

With NRI conducting grander scale research after their internal study, and UBS repeatedly widening their blockchain research scope, it shows that mainstream securities companies are finding blockchain technology promising, with initial results worthy of further investigation. With so many major players in the securities industry independently studying the blockchain, it’s only a matter of time before there is a real application that improves the global securities market.