Warsaw Stock Exchange Bets on Blockchain

The parent of the Warsaw Stock Exchange is entering the capital markets technology arena, with a focus on blockchain technology.

The exchange’s supervisory board has approved the GPW Tech project, a strategic initiative of GPW Group.

The project team intends to develop tools based on blockchain, which exchanges generally have been slow to embrace. A 2018 study by Celent found only 5% of exchanges around the world had deployed distributed ledger technology. Even so, Marek Dietl, CEO of Warsaw Stock Exchange, points out that the group’s exchange depository companies are already working on e-voting systems based on blockchain. “There are use cases—there is plenty of talent in Poland,” he says, adding that blockchain’s potential “looks promising.”

The Warsaw Stock Exchange currently buys its technology from providers such as Euronext and Nasdaq. According to Dietl, it decided to create the technology arm after studying the market and realizing that the bigger stock exchanges derived around 10% of their revenue from different technologies. “We also looked at what the exchanges were acquiring recently,” he says. “[In the] last eight years [exchange acquisitions] are mainly tech companies, so there are very few exchange-to-exchange mergers.” 

Besides blockchain, the project will also focus on connectivity, artificial intelligence and the cloud. “Due to the limitation of our domestic economy, we cannot be a large stock exchange,” says Dietl. “Our economy is simply not large enough. If you cannot enjoy great economies of scale, you have to be smart. And we think with smart technology we can remain very competitive.” 

He says some of the new vendor’s staff will be internal hires, but the majority of personnel are expected to be recruited from outside. Dietl says the new company will be a separate entity with a customer-oriented approach. “Even if they sell us something, they should treat us as a customer,” he says. 

Dietl expects Warsaw Stock Exchange to be the first test client that will help the new vendor to evaluate the quality of its technology. Proliferation of technology in the region is limited as exchanges are relatively small and markets are fragmented, meaning many cannot afford to buy expensive foreign technologies, he says. Dietl adds there is potential for targeting clients not only in Poland, but also eastern Europe and the Middle East. 

GPW Group plans to hold a consultation in the coming months, with the launch of the GPW Tech project scheduled for the third quarter of this year.