Vanguard is launching a new platform that uses blockchain technology to simplify the process of sharing data with index providers. The platform, which it expects to introduce early next year, has the potential to reduce errors and increase cost savings and returns for investors, according to spokeswoman Carolyn Wegemann.
Under the current system, Vanguard constantly receives updated files from index providers about corporate actions throughout the day, which are then manually processed. The data transmission usually involves multiple parties and distribution channels. The new platform will allow index data to move instantly between index providers and market participants through one decentralized database.
“Using this platform, investment managers will be able to instantly distribute, receive and process index data, resulting in better benchmark tracking and significant cost savings that potentially results in better returns for our clients,” said Warren Pennington, a principal in Vanguard’s Investment Management Group, in a statement.
The blockchain platform is being developed in collaboration with the Center for Research in Security Prices, whose benchmarks are tracked by 17 Vanguard index funds with a total AUM of about $1.15 trillion, and tech company Symbiont, whose smart contracts platform for institutional applications uses blockchain technology. A successful pilot study of the platform for the 17 funds was recently completed. Vanguard has not decided yet which funds will be included in the new blockchain platform when it launches in early 2018, according to the spokeswoman.