The Sydney Stock Exchange has partnered with Bit Trade Labs, an Australia-based blockchain startup, for a joint venture on instant settlement of trades using blockchain technology.
The partnership, announced in May 2016, is targeting implementing a blockchain solution, subject to regulatory and market participant’s approval and engagement, within months for its private markets network and early in 2018 for the SSX equities market. The firms aim to reduce settlement times from four days to none.
Speaking at the SINET 61 conference in Sydney on Wednesday, SSX director of market development Loretta Joseph said that the project will remove settlement risk from its customers and free up liquidity in financial markets, ZDNet reported. Joseph added that they have embarked on the project as a response to the monopoly of the Australian Securities Exchange (ASX) on the clearing and settlements infrastructure.
Earlier this year, ASX selected blockchain startup Digital Asset Holdings to develop solutions for the Australian market utilizing Distributed Ledger Technology, with initial focus will be on post-trade (clearing and settlement) services in the cash equities market. Last month, ASX stated that it has completed the initial phase of a distributed ledger-based prototype for the replacement for CHESS, its clearing and settlement system.
Joseph said that as the SSX is a small market, it gives a great opportunity to implement change.
"This provides the ideal opportunity for my little exchange to develop its own clearing settlement registration function," she said. "It means that I take control of my own destiny rather than relying on my own competitor."
SSX Chief Operating Officer David Lawrence had clarified earlier that although the firms will be developing the blockchain solution initially for the SSX, they “fully intend to make it available to other markets, and have an open access philosophy”.
Lawrence added that moving to a real-time settlement and registration environment (T+0) was a "realistic aspiration" for SSX’s blockchain based solution.
“T+0 would deliver many benefits – remove collateral risk, increase trade velocity and hand back some controls to brokers and market participants rather than them and us paying fees to other exchanges,” Lawrence said.
