ASX gears up to take on IBM and Microsoft in blockchain-as-a-service
When the Australian Securities Exchange (ASX) completes the build of its blockchain platform mid-next year to replace its legacy Clearing House Electronic Subregister System (CHESS), it will mark the launch of its commercial business as a blockchain service provider.
“We’re entering a competitive space. This [will be] little ASX in Australia competing with the global behemoths that are IBM, Microsoft, and other big tech players who provide blockchain-as-a-service,” ASX equity post trade executive general manager Cliff Richards said.
“We’re the underdog here.”
However, such competition will not be enough to deter the ASX from allowing third parties to develop applications and host them on its blockchain-based platform when its built, according to Richards.
“We’re fancying ourselves as being able to deliver better value,” he said, touting that the long-standing trust the market has in the organisation to not do “anything dodgy” will give it the competitive advantage.
“Because we’re trusted, we’re recognised, brands are understood, and we’re adults in the room. We’re not hysterical. We’ve kept markets going for one and a half centuries,” he continued.
Read more: Here’s what to expect from ASX’s blockchain-based CHESS replacement
While Richards admits some have accused the new offering as a sign of the ASX abusing its “privileged monopoly position”, he contends there is nothing stopping others from competing with the organisation, “they’ve just got to stump up the money and build a competing service”.
“The monopoly we have here is because we just happen to be the only organisation providing clearing and settlement services to the stock market in Australia. Anyone can come and compete. If that’s so lucrative, where are they?” he said.
He speculated that no one has attempted to compete against the ASX because it’s doesn’t make economic sense.
“I’d say why would you? It’s not a lot of money — AU$50 million from settlement. But what we’ve seen is when the market said, ‘The cost structures in financial markets are killing us, can you do anything to assist?’ We’ve gone, ‘Yes, we believe we can’,” Richards said.
“In replacing [CHESS], we can take this infrastructure and make it available to the rest of the market, and the rest of the market can bring innovation to the equation.”
And if ASX’s plan to become a blockchain service provider doesn’t work out, Richards reckons there’ll be no loss.
“We’ve replaced CHESS with a system for the next 20-odd years that’s operating on global standards, has functions that have been requested by the market … the market is way better off,” he said.
When ZDNet asked whether the market would be ready for the launch of the blockchain-based platform, Richard said “the market is highly engaged now”.
“We have 31 participants in our development environment, so not the testing environment … The asset testing will kick off in the middle of next year when we open up phaseable industry-wide testing,” he said.
“That’s where all the participants will need to start to connect and prove to us their dependent systems can perform functions that their licensing obligation requires them to.”
See also: Blockchain: A cheat sheet (TechRepublic)
But the ASX is not alone when it comes to adopting blockchain for clearing and settlement. Richards said counterparts in Hong Kong, Singapore, the United States, and European Union are exploring the use of the technology as well.
“Blockchain will get adoption in the same way any other technology gets adoption,” he said.
ASX’s speedy adoption of blockchain technology — a process that started in June 2016 — was sparked by what Richards referred to as “symmetry alignment”.
“Australia has a relatively unfragmented market, on a relative basis. It’s easier to get the market here, it’s easier to have conversations with 100 participants, rather than thousands, which is the case in the US,” he said.
“Our regulators, we can get them into the room at the same time and have the conversation once, rather than having in the US 13 different conversations with federal regulators and then the same conversations with state regulators.
“We are blessed with certain circumstances in Australia that have allowed us to move faster than other jurisdictions.”