Blockchain Scores Major Win as Aussie Exchange Plans Shift

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  • ASX will use Digital Asset Holdings technology to track trades
  • Cash debt market may also see switch, says bourse CEO Stevens

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Australia’s main stock exchange just announced one of the finance industry’s biggest bets yet on blockchain.

ASX Ltd. will start using blockchain -- the ledger software that makes bitcoin and other cryptocurrencies possible -- to process equity transactions, according to a filing Thursday. Digital Asset Holdings LLC, the startup run by former JPMorgan Chase & Co. banker Blythe Masters, will supply the technology.

“We’re the first exchange to consider taking this step,” Peter Hiom, ASX deputy chief executive officer said on a media conference call.

Blockchain is massively hyped and banks have conducted myriad tests of the ledger technology, with few live deployments. Proponents tout it as a more efficient and less expensive way to track trades. 

Cliff Richards, head of equity post-trade at ASX said moving to blockchain could also be beneficial for Australia’s securities regulator.

“To the extent that it helps them get the reporting details that they need, and potentially move more to more proactive action, we believe that it puts them in a position to do those types of things,” he said on the call.

Embrace Technology

“It surprises me that ASX is doing it ahead of other big exchanges,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, which manages about $135 billion according to its website. “When the technology becomes available, you have to embrace it.”

Read More: Blythe Masters Tells Banks the Blockchain Will Change Everything

No date for the shift has been announced for replacing ASX’s Clearing House Electronic Subregister System, known as Chess. The new technology will let customers lower costs and introduce new services from the real-time post-trade data, Hiom said.

“The Chess system’s been around since the ’90s,” said Gareth James, an analyst at Morningstar Inc. “Imagine if you’re using any software on your PC from the ’90s.” 

Marginal Cost

Chess was scheduled to be upgraded even before the exchange had considered blockchain, said Dominic Stevens, ASX’s chief executive officer. ASX therefore views the switch as a “marginal cost” that will be part of the company’s capital expenditure program, he said.

“The costs in rolling out this system I don’t think are too dissimilar to us having rolled out a traditional system,” Stevens said on the call.

The exchange also invested more in Digital Asset Holdings, bringing the total raised by the startup from investors including JPMorgan and CME Group Inc. to more than $115 million, according to a statement from the firm.

ASX shares closed 0.7 percent higher at A$57.33 in Sydney after rising as much as 1.5 percent in early trading.

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