Australia: Stock exchange faces competition for blockchain shares

NSX Limited, the operator of the Australian National Stock Exchange of Australia (NSXA), is working on a joint block-chain project to enable same day settlement.

According to an announcement on February 20, NSX has entered into a partnership with iSignthis (ISX). This is a listed company that specialises in payment authentication. Under the terms of the partnership, a new company is to be established to provide “real-time, same-day clearing of stock transactions across multiple exchanges and in multiple currencies”.

 

With DESS, CHESS gets new competitors

The new company called ClearPay will develop a platform for delivery versus payment (DvP). This will replace the existing clearing and settlement system currently offered by traditional domestic and foreign exchanges.

Using distributed ledger technology, ClearPay will reduce the settlement time from three days to the same or early next day. It also plans to develop an open, block-chain sub-registration system.

According to the official announcement, ClearPay’s Digital Exchange Subregister System (DESS) will essentially compete with Australia’s first block-chain subregistration platform called Clearing House Electronic Subregister System (CHESS). CHESS was introduced by the Australian Stock Exchange in 2017 and has apparently become a cause for concern due to its monopoly in the market.

 

iSignthis provides ClearPay with KYC expertise

NSX will initially invest USD 3.2 million for a 41 percent stake in ClearPay. iSignthis will initially hold a 59 percent stake. As part of the collaboration, iSignthis will contribute intellectual property. For a fee, the subsidiary Probanx Solutions will design the DvP platform and integrate it into the Paydentity and ISXPay platforms.

John Karantzis, the Managing Director and CEO of ISX, who will also serve as CEO of ClearPay, explained that iSignthis will contribute its payment and identity verification services as these are the company’s areas of expertise. Karantzis also stressed that the new company will bring competition to the Australian market:

“It is very exciting for us that the ClearPay joint venture will bring real competition to the Australian cash equity ecosystem. iSignthis will provide NSXA with inherent high technology, including its comprehensive payment and identity verification services ISXPay and Paydentity”.

 

Regulatory conditions for ClearPay

In addition, the DvP platform will initially operate according to DvP Model 1. This is a securities settlement mechanism offered by the Bank for International Settlements. ClearPay does not wish to apply for a licence as a clearing and settlement institution, as the products offered by NSXA for ClearPay are subject to identification and verification by the counterparty via Paydentity. A public order and settlement book forms the so-called “Lit Exchange”.

As Cointelegraph reported in October 2019, the Australian subsidiary of the market operator Chi-X has asked the country’s competition authority to investigate the impact of the Australian Stock Exchange’s CHESS system on trading activities.

Shortly before, on February 7, the Australian government began implementing its national blockchain strategy, which it had been preparing for about a year.