ASX to Build Its Own Blockchain for Trade Settlement

The Australian Stock Exchange has become one of the 13 chief investors in Digital Asset Holdings.

Non-executive chairman Rick Holliday-Smith (left) and CEO Elmer Funke Kupper (right). Photo: ASX Annual Report 2105.

Non-executive chairman Rick Holliday-Smith (left) and CEO Elmer Funke Kupper (right). Photo: ASX Annual Report 2105.

The Australian Stock Exchange (ASX) is planning to develop new post-trade platforms on the blockchain technology. It has become one of the 13 leading investors in fintech company Digital Asset Holdings. Altogether the latter raised $50 million. Thus ASX hopes to become the first stock exchange in the world to use distributed ledger technology for public companies.

“Distributed Ledger Technology could provide a once in a generation opportunity to reduce cost, time and complexity in the post-trade environment of Australia’s equity market,” ASX Managing Director and CEO Elmer Funke Kupper said. “Moreover, it could stimulate greater innovation by ASX and other providers of services to issuers, investors and intermediaries.”

ASX acquired a 5 percent stake ($14.9 million) in New York-based Digital Asset in order to make transactions cheaper, faster and more secure. It will fund an initial phase of development and get a warrant that will give it the right to purchase further equity and appoint a director to the board. It will cooperate with Digital Asset having one common purpose – develop a new post-trade solution for the Australian equity market.

So far the exchange has been using the aged CHESS platform for clearing and settlement services to the local equity market. However it strives to avoid replacing the out-of-date platform with a new version based on the same legacy processes currently available in the market. “We should aim to re-engineer and simplify those processes to deliver significant benefits to the users of the market,” Elmer Funke Kupper said.

ASX will continue to operate using CHESS platform. It needs some time to decide on the technology that will underpin the ASX’s post-trade technology in 2017.

ASX shared its plans to develop a distributed ledger technology which differs from the blockchain. Presumable it will be based on a private network where all involved parties will have permission to participate. “Distributed ledger technology may be able to significantly simplify and speed-up post-trade processing,” states ASX. “For ASX clients this could remove risk and reduce back-office administration and compliance costs, while investors could experience significantly faster settlement of equity transactions – potentially in near real-time.”

Besides ASX, Digital Asset Holdings has raised $50 million in funding from such companies as ABN AMRO, Accenture, BNP Paribas, Broadridge Financial Solutions, Inc., Citi, CME Ventures, Deutsche Börse Group, ICAP, J.P. Morgan, Santander InnoVentures, The Depository Trust & Clearing Corporation (DTCC) and The PNC Financial Services Group, Inc. “These investments represent a tremendous endorsement of Digital Asset from banks, exchanges, settlement and clearing firms, central securities depositories, and market infrastructure and professional services providers,” says Blythe Masters, Digital Asset’s CEO.

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