The IEX Group, which shocked market participants on August 19 when it became the first official exchange to offer a mechanism to bypass HFT predatory algos and frontrunning against all odds, including vocal complaints by established players like Nasdaq and Citadel, now seeks to revolutionize the more than $5 trillion-a-year gold market with a new exchange being created by its spinoff TradeWind Markets, Reuters reports.

The proposed gold exchange would be a fascinating departure from convention, as it would use elements of blockchain technology to improve transparency and the clearing and settling of trades, an aspect missing in legacy offerings, said Matt Harris, a managing director at Bain Capital Ventures. Bain has an investment in IEX. Blockchain is a tamper-proof shared ledger that can automatically process and settle transactions using computer algorithms.

The new gold exchange is said to leverage the technology used by IEX for its new equities exchange, The Investors' Exchange, which launched last month after operating for more than two years as a dark pool. TradeWind plans to utilize the distributed settlement system in blockchain to eliminate the need for third party verification by giving participants an up-to-the-minute record of all transactions.

It was unclear if in addition to more trade transparency, the exchange would offer the same anti-HFT benefits as its famous 350 microsecond speed bump provides when trading equities.

According to Reuters, TradeWind Markets began as an internal project of IEX and was spun off as a separate firm earlier this year. In June, the startup raised $9 million, according to a regulatory filing with the U.S. Securities and Exchange Commission. Reuters adds that the funding came from IEX and Sprott, a Canada-based investment firm that manages physical bullion funds.

One of the recurring laments about the existing form of the gold market is that it lacks transparency, which also makes the gold market ripe for change, said Harris, who is on TradeWind's board.

"It's too slow, it's opaque as to who owns what and when along the way, and there's lots of room for error that requires manual reconciliation," Harris said of the gold market. "A system that was instantly self-reconciling and 100 percent transparent would solve a lot of problems." TradeWind is lining up more equity investment partners and strategic and commercial partners for the venture, the launch of which is still months away, said the source.

The firm's CEO Brad Katsuyama also sits on TradeWind's board of directors, as do IEX Chief Technology Officer Rob Park and Sprott Chief Executive Peter Grosskopf.

IEX may not be the first one to market with at blockchain-based gold exchange however: Belgium-based clearing and settlement firm Euroclear said in June it was working with blockchain services provider itBit to develop a settlement system for gold using blockchain.