Sydney Stock Exchange develops blockchain settlement system
Sydney Stock Exchange (SSX, formerly Asia Pacific Stock Exchange) is building a settlement system based on the distributed ledger technology. Specialist consultancy firm Bit Trade Labs is assisting with the project.
To begin with, the new blockchain system will be used to settle trades in private companies, but SSX hopes that once the regulator grants its approval, the system can be extended to publicly listed stocks.
The new solution is marketed as a low-cost alternative to larger and more established players such as Australian Securities Exchange (ASX).
SSX hopes to attract venture capital and private equity firms that want to exit their investments.
The system should be ready by early 2018.
Once operational, the technology will be offered to other stock exchanges, mainly small commodities players (SSX is itself a very small entity). “A lot of these commodities markets are very inefficient,” says Loretta Joseph, the project’s chief consultant at SSX. It can take up for a month to settle a trade, as many are still paper-based. SSX’s blockchain platform will offer practically immediate settlement.
David Lawrence, COO of SSX, also emphasises the open nature of the development: ” We fully intend to make it available to other markets, and have an open access philosophy.”
SSX’s version of blockchain will be a public distributed ledger, meaning it will be open to any company or broker to use it.
“Our key drivers are to improve efficiency and save our market participants and brokers money,” Lawrence states. The new blockchain solution will reduce 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”, he adds.
This is a different route to that of ASX, which is planning to replace its existing clearing and settlement system with a private blockchain (and hence with a limited and known number of participants).
SSX’s predecessor was granted a stock exchange licence in 2004. In 2008, it was acquired by AIMS Financial Group and renamed Asia Pacific Stock Exchange (APX). In November 2015, it adopted its current name, SSX. Its main focus is on China.