Blockchain Application to Further Reduce Vanguard’s Index-Fund Costs

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Vanguard has successfully pilot-tested a blockchain application to further reduce its index-fund costs, writes Joseph DiStefano for the Philadelphia Inquirer.

The application automates the sharing of both stock index prices and updates, allowing data to be sent faster and more cheaply. The system, developed by New York City-based Symbiont, has been tested at Vanguard over the last several months.

Blockchain is a digital ledger program that allows a network of verified users to quickly update data. According to Vanguard, up until now, updating index values meant having to depend on “multiple parties and distribution channels.”

The blockchain application provides a decentralized network of investment professionals with a way to accept and post verified prices without having to go through a central approval authority.

Vanguard plans to start using blockchain early next year for indices set up by the Center for Research in Security Prices. This supplies Vanguard with benchmarks for its Total Stock Market Index and other funds.

“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,” said Warren Pennington, a principal in Vanguard’s Investment Management Group.

Read more about the blockchain application in the Philadelphia Inquirer here, and check out previous VISTA Today coverage of the Malvern-based investment giant here.

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