Nasdaq and DAH to develop securities clearing system for ASX

Rage Comment : Although the global financial industry is very optimistic about blockchain technology, no one knows whether blockchain can bear the burden of transforming the entire financial industry. So far, there has not been any blockchain application that can be truly called industrial grade. Needless to say, the Bitcoin blockchain itself has various limitations. Most other blockchain projects are still in the testing phase. Although private chains can solve some efficiency problems, how to connect with existing financial facilities, whether the traditional financial system that has invested trillions of dollars can really start from scratch, and how many unexpected results will be produced are all beyond our control now. From this perspective, ASX seems to be at least a brave pioneer.

Translation: Prince Gong

Australia's main stock exchange is planning to use a trustworthy system to upgrade its securities clearing system, and does not rule out exploring the use of emerging blockchain technology to transfer securities funds.

The Australian Securities Exchange has reached an agreement with Nasdaq, the US operator to upgrade the Sydney group's securities clearing platform. Nasdaq's involvement in the project is mainly to try to create a new settlement system that can work.

Nasdaq Chief Executive Bob Greifeld told analysts last week that the yet-to-be-announced deal would result in "an outstanding quarterly order total."

The news comes after the ASX announced it would be working with Digital Asset Holdings (DAH), a US blockchain technology services provider, to design a clearing and settlement system for the Australian securities market.

ASX has a long-term plan to upgrade its trading and post-trade platforms over the next three years, with Nasdaq and Sweden's Cinnober Financial Technology providing components of the system.

DAH is likely to upgrade ASX's existing settlement system, CHESS (Clearing House Electronic Subregister System), which is a securities settlement service used to transfer funds between counterparties and legal share holders.

The move reflects the growing interest among global trading, clearing and settlement operators in the potential of blockchain technology, which can bring vast amounts of low-cost computing power to many financial markets. It enables digital assets to be moved between trading counterparties without the need for any central authority to record transactions. A shared digital public ledger can be continuously maintained to confirm transactions by all participating chains and prevent fraud.

Backers of the technology say it could speed up slow and inefficient back-end operations and reshape trading and settlement processes.

However, a report published on Wednesday by consultancy Oliver Wyman and European clearing house Euroclear argued that "the hurdles to be overcome are enormous and the ultimate outcomes are not clear."

The report says establishing market operators requires developing standards that implement all the capabilities of existing payment and settlement systems and meet existing regulations.

It points out that many of the advantages touted for blockchain could be achieved by expanding the role played in markets by central government depositories, such as ASX’s CHESS.

ASX has not yet committed to using blockchain technology, but will use it to work with existing systems. "This needs to be able to benefit all stakeholders, and a final decision on the use of post-trade technology in Australia will be made before 2017."

DAH is led by former JPMorgan Chase executive Blythe Master, who said yesterday that IBM and Goldman Sachs have invested in DAH and raised more than $60 million in funding.