In a statement released on Friday, the ASX announced it has joined 12 other “global financial services leaders” by making a minority investment in US-based firm Digital Asset.
The ASX has paid A$14.9 million to acquire a 5 per cent equity interest in Digital Asset and fund an initial phase of development.
The ASX has also acquired a warrant to purchase further equity and appoint a director to the board, as long as certain conditions are met.
“In February 2015, ASX announced that it would replace or upgrade all of its main trading and post-trade platforms. Phase 1 of the program runs to the end of 2016 and will replace ASX’s existing trading and risk management systems,” said the statement.
“Phase 2 focuses on ASX’s post-trade services, including clearing and settlement of the cash equities market. The system that currently provides the clearing and settlement services to the Australian equity market is known as CHESS.
“ASX will work with Digital Asset to design a new post-trade solution for the Australian equity market,” the statement continued.
Within the first six to 12 months, Digital Asset will develop a solution that will demonstrate the benefits that distributed ledger technology (ie, the blockchain) could bring to investors, companies and intermediaries, said the ASX.
“The development will take place alongside CHESS, which will continue to operate as normal. This will allow all stakeholders to assess the benefits and implications before a final decision is made on Australia’s post-trade technology in 2017,” said the statement.
“ASX and Digital Asset will engage with regulators and Government agencies to assess the benefits that a new solution could deliver to them, and ensure that any future post-trade solution will meet the high regulatory, operational and security standards that apply to Australia’s financial markets,” it said.
The technology developed for the ASX will differ from the publicly available blockchain, said the statement.
“The architecture will be based on a private network whereby all parties that participate will be permissioned to do so – as they are today when they connect to CHESS,” said the ASX.
“Distributed ledger technology may be able to significantly simplify and speed-up post-trade processing. 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.
“Adoption of distributed ledger technology has the potential to stimulate greater innovation by ASX and third parties to develop new services for intermediaries, end-investors and listed companies. This would create a more competitive marketplace across a broad range of services,” the statement said.
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