The Disruptive Effect of Distributed Ledger Technology and Blockchain in the over the Counter Derivatives Market

Abstract

Abstract The market for derivatives is substantially different after the 2007/08 financial crisis. Trust fuels business yet the financial crisis undermined this concept and customers lost faith in financial institutions. The then dichotomy, faced by innovators, was to insist with a system based on trust in financial institutions, or explore others where neither trust nor banks, as intermediaries, were indispensable for the successful and safe completion of financial transactions. The aim of this piece of research is to analyse to what extent innovative technology would change the way the ‘Over The Counter’ (OTC) market operates by providing investors with a trustworthy platform for the efficient assessment of the risk behind certain financial instruments. Consequently, the market may not be caught by surprise when another financial crisis strikes.