Barclays has tested a way to trade derivatives using so-called "smart contracts" and blockchain-like technology being developed by a consortium of the world's leading banks, the British lender said on Tuesday.
A derivative is essentially a trading contract between two or more parties that can take many forms and is based on an underlying asset.
Currently, the contracts are made up of three main parts with a body called the International Swaps and Derivatives Association (ISDA) creating the standards across the financial world for derivative trading. But the process is arduous with current paper contracts in the form of computer documents still being issued.
A "smart contract" on the other hand is a computer program that can automatically execute the terms of a contract when certain conditions are met, potentially taking a lot of the human involvement out of completing a deal.