Financial Technology innovation
London Stock Exchange and IBM to pilot blockchain for European SMEs using Hyperledger Fabric version 1.0 iStock

The London Stock Exchange Group and IBM have partnered to build a blockchain solution for digitising the issuance of private securities of small and medium enterprises (SMEs) in Europe, both parties confirmed on Wednesday (19 July).

The blockchain solution would be built and tested by Borsa Italiana, the LSE Group's Italian exchange operator. Premised on a conventional blockchain, the LSE-IBM partnership intends to create a distributed shared registry containing a record of all shareholder transactions, helping to open up new opportunities for trading and investing in SME securities.

Raffaele Jerusalmi, chief executive officer of Borsa Italiana, said the solution will ultimately make it easier to track and exchange shareholder information of unlisted businesses, and replace the paper trading certificates that are commonly issued to private companies today.

"We are taking the lead in transforming the way European SMEs can manage their shareholder data and at the same time expand credit access - all on a trusted digital platform."

Traditionally SMEs lack access to public stock exchange networks or more formalised credit structures, but Jerusalmi said solution would help smaller entities link into a broader and more mature investor ecosystem, as well as obtain funding by sharing financial data in a security-rich and transparent manner.

The solution would be built on Hyperledger Fabric version 1.0; a blockchain framework. It is one of the Hyperledger projects hosted by The Linux Foundation. The system is designed to help ensure that highly sensitive securities data can be shared amongst allowed network participants while remaining secure and gated.