1. They really shine in a p2p architecture where no party trusts each other. But that's not how the financial system works. Banks trust central banks, exchanges and clearing houses, and it is very much a club where players have to be vetted and monitored by a regulator, quite far from the open and wild nature of p2p systems.
2. Market participants need anonymity. Morgan Stanley might not know who hides behind the cryptographic key xxxxx until they do a trade with Goldman Sachs, see that trade appearing in the public ledger and then suddenly they see every single transaction Goldman has done since the dawn of times. Markets need anonymity otherwise market participants can arbitrage you based on what they know you need or plan to do. And the transparency of the public ledger is a fundamental problem.
3. Regulators need transparency. The regulators will need a centralised place where they can put a name against every transaction. That I would thought almost defeats the purpose of the ledger since a traditional transaction log will have to be maintained on the side. Now you have two ledgers.
I remember this excellent blog article explaining when blockchains are pointless and unless I missed something, financial transactions do not meet conditions 3 (Absence of Trust), 4 (Disintermediation).
http://www.multichain.com/blog/2015/11/avoiding-pointless-bl...