The Australian Securities Exchange (ASX) has revealed new details about its effort to innovate in the Australian equities market with blockchain technology.
The ASX is now actively working on a technology transformation programme that will employ blockchain (distributed ledger) technology to potentially replace its equities settlement systems.
In its half-yearly results, the group said it incurred AU$18.7m on capital expenditure during the period ending 31st December 2015, compared to $13m in the previous period.
That expenditure was primarily spent on the technology transformation program – which will see a replacement developed for the ASX’s futures and cash market trading platform – as well as the enhanced risk management platform. These are expected to be completed during 2016.
The next phase of the exchange’s technology transformation program will focus on its equity post-trade platforms based on blockchain tech.
Elmer Funke Kupper, ASX managing director and CEO, said in a statement:
“We believe that distributed ledger technology has the potential to change the way our market operates end-to-end, reduce risk and costs for our clients, speed-up the settlement process for investors, and support new services for listed companies.”
Buying into blockchain
As part of that plan, the ASX invested in blockchain technology startup Digital Asset Holdings in late January.
The New York-based firm, which is led by ex-JPMorgan exec Blythe Masters, seeks to use private or permissioned blockchain technology to streamline financial processes such as syndicated loans.
Digital Asset recently also engaged with JPMorgan on a similar blockchain initiative that aims to make the trading process more efficient and cost effective.
The ASX said it has invested $14.9m to acquire a 5% stake in the company and fund an initial phase of development for its blockchain project.
“The initial development will take place over the next six to 12 months and will bring to life the benefits and implications of a new post-trade solution for the Australian equity market. The development will take place alongside CHESS [the ASX’s current Clearing House Electronic Subregister System], which will continue to operate as normal,” the stock exchange said.
Both firms will engage with regulators and government agencies to ensure compliance with the regulatory, operational and security standards that apply in Australia’s financial markets.
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