Innovation in financial markets and market infrastructure is occurring at a pace that exceeds historical norms. New technologies are reshaping assets, expanding tradable instruments, and transforming how investors access markets and make decisions, according to the Digital Finance Cooperative Research Centre (DFCRC).
These developments are outlined in a new report, Innovation in Financial Markets and Financial Market Infrastructure, prepared by DFCRC for ASIC.
Notably, as T+1 settlement becomes the emerging global baseline, Australian financial markets face increasing pressure to minimise cross-border frictions and maintain alignment with evolving post-trade standards.
T+1 settlement means transactions are finalised one business day after the trade takes place.
The United States has been operating on T+1 since 2024, while Europe and the United Kingdom are moving toward implementation in 2027. According to DFCRC, Australia’s key challenge is less about trading or clearing technology and more about coordinated change across the post-trade ecosystem. This requires alignment among intermediaries, infrastructure providers, and regulatory settings to preserve efficiency and market integrity.
The report warns that while settlement cycles in Australia are likely to continue compressing, structural limits in legacy infrastructure mean there are bounds to how far existing systems can go. DFCRC observes that market infrastructures can only move so far toward shorter settlement cycles using current systems and technology.
“Moving beyond T+1 toward real-time or intraday settlement would require changes to underlying market architectures, rather than incremental process optimisation alone,” the report said.
“The international shift toward shorter settlement cycles, extended trading hours and incumbent-led tokenisation may create pressures that a reactive approach alone cannot address. On the current trajectory, Australian financial markets may face increasing friction in cross-border activity as T+1 becomes the global baseline.”
Regulators including ASIC, in coordination with the Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA), and the Australian Treasury, are becoming increasingly central to shaping a credible pathway forward.
Evidence suggests shorter settlement cycles can reduce risk and improve liquidity, particularly where funding constraints are tight. However, they also increase operational demands across the post-trade system.
Regulators must therefore balance efficiency gains against coordination and stability risks as markets move to T+1 and potentially beyond.
DFCRC suggests ASIC may need to take a more active coordinating role across the broader post-trade ecosystem, while maintaining consistent investor protection and market integrity standards across parallel systems. This must be done without stifling innovation or creating regulatory arbitrage between new asset classes and traditional off-chain assets.
The report highlights that asset tokenisation has accelerated rapidly over recent years. According to Citi, the tokenisation market could reach between US$2 trillion and US$8 trillion by 2030 as real-world assets move on-chain.
DFCRC estimates that full-scale adoption of tokenised wholesale financial assets could generate global gains of around US$2.7 trillion per annum, and approximately AU$24 billion annually in Australia.
“While adoption remains in its early stages, the evidence suggests growth is expected to continue at high rates. The trajectory increasingly points toward a tokenised form becoming the standard way most financial assets are issued, held, and settled,” the report said.
“Beyond money, adoption is expected to continue to scale first in asset classes where the economic impact potential is most immediate and measurable. This includes MMFs, repos, and fixed income issuance, where gains translate directly into liquidity, balance-sheet, and collateral benefits.”
According to DFCRC, multiple forms of digital money – including stablecoins, deposit tokens, and central bank digital currencies (CBDCs) – are likely to coexist within the financial system, with no single dominant model emerging.
“In addition to enabling new market structures and settlement mechanisms, tokenisation is changing how assets are used in financial services more broadly, including embedding compliance, automating asset servicing, and real-time collateral substitution. Thus, tokenisation is changing what a financial instrument can do, not merely how it is held,” the report said.
In Australia, tokenised fixed income products are expected to be among the earliest tokenised instruments to gain traction, “given their clear economic advantages and broad applicability across use cases, as demonstrated by Project Acacia,” the report noted.
DFCRC argues that adoption will depend heavily on the concurrent development of market architectures capable of supporting trading and settlement at scale.
Overall, the evolution may require ASIC to strengthen its supervisory capabilities to oversee traditional and emerging tradable assets in parallel. “The coexistence of these markets provides opportunity for new forms of market misconduct including traversing traditional and new tradable assets to avoid detection,” the report said.
“Close coordination with the RBA, APRA, and Treasury on the treatment of different forms of digital money, as well as engagement with international peers on crypto assets and novel instruments, such as perpetuals and event contracts, would help ensure Australia’s regulatory settings keep pace with the speed at which these markets are developing.”
As the traditional linear sequence of trading, clearing, settlement, and custody begins to erode – and as it becomes less clear which entity performs which function – DFCRC suggests ASIC may need to consider how its regulatory architecture adapts to new digital financial market infrastructure (DFMI) models that do not map neatly onto existing licensing frameworks.
“The development of dedicated regulatory frameworks for digital financial market infrastructures across major jurisdictions underscores the importance of Australia establishing its own structured pathway to accommodate tokenised markets,” the report said.
“Without a comparable framework, there is a risk that innovation may slow or migrate to jurisdictions offering greater regulatory clarity, and that Australian market participants may fall behind in developing the operational expertise needed to compete in increasingly global tokenised markets.”
DFCRC also highlights that agentic AI, increasingly autonomous trading systems, and models with limited explainability are becoming harder to assess through traditional notions of trader intent or fixed algorithm design. This places additional pressure on ASIC’s surveillance capabilities and increases the need for ongoing investment in data, analytics, and technical expertise.
“Such trading systems also raise legal/enforcement questions about how to define and prove misconduct that is distinguished by intent, such as market manipulation.”
Financial market innovation is advancing across multiple dimensions simultaneously. For Australia, these international developments carry direct implications.
“Tokenisation of financial assets, new market architectures, and AI-driven trading and compliance tools are not confined to offshore markets. Instead, they increasingly also shape the competitive environment in which Australian market participants, venues, and regulators operate.”
DFCRC suggests that a structured and forward-looking approach – balancing market integrity and investor protection with openness to innovation – will be important in maintaining the competitiveness and relevance of Australian financial markets in the years ahead.
ASIC held the first of several roundtables on 30 June, in response to the report, as the watchdog pushes for coordinated action to bolster competitiveness in local capital markets.
“The geographic barriers that once constrained the flow of capital are being eroded by technological developments. This makes it easier than ever for investors – wholesale and now retail – to invest offshore. The large-scale tech IPOs we’re seeing are a symptom of this, and they will only become more common,” commissioner Simone Constant said.
“[The] roundtable is not about innovation for innovation’s sake. ASIC’s role is to provide the clarity necessary for responsible innovation, and the guardrails that keep markets stable and orderly and to keep the infrastructure operators who underpin the market, accountable and competitive.”
