The timing is almost perfect for the Australian Securities Exchange (ASX) to consider a blockchain-powered settlement system, says its CEO, Elmer Funke Kupper.
In October, Australia’s main exchanges operator was reported to be considering the replacement of its current settlement and clearing system with one based on blockchain technology.
Bitcoin’s blockchain and other distributed ledger systems inspired by it are now being explored by a majority of the world’s major financial institutions and several exchange operators. The technology is envisioned to streamline the trading process by enabling real-time settlement, thereby reducing costs, cutting out counterparty risk and freeing capital.
ASX is reportedly planning to upgrade its settlement and clearing system by the end of 2016. Speaking to Financial Times, Funke Kupper commented:
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“We’re having a very close look at this. The timing is almost perfect. Where blockchain can make an enormous difference, we’re having a look at whether this is a way to transform our equity markets.”
A decision won’t be made for another 6-7 months, he added. In the meantime, ASX would consider partnering with other companies to build the system.
Also interesting is that the ASX blockchain settlement may be optional for clients. “You want to be able to settle in real time where it’s beneficial and settle later where it is not,” he said.
Several major exchanges, including Nasdaq, London Stock Exchange (LSE) and CME Group have embarked on blockchain projects, but it is not yet clear if/when there will be live implementations. Nasdaq’s trial for its pre-IPO market is taking place, and if successful, the technology would be considered for its main exchange.
Funke Kupper also pointed to the registry system used by ASX, which it also owns, that keeps details of market players on record. “In the US they can’t do it. We have a central ‘know-your-customer’ utility that is incredibly powerful. As we own the central securities depository, it allows us to bring everyone along,” he said.