Innovation in the global $77bn post-trade market will ramp
up if ASX’s blockchain proof of concept is
successful, according analysts at Morgan Stanley.
ASX is working with Digital Asset Holdings to build a
"distributed ledger" that could ultimately replace the clearing
and settlement systems provided by ASX through its CHESS
The exchange has paid close to $15m for a 5% equity stake in
the New York-based company.
A "go or no go" is expected by mid-2017 after a blockchain
prototype has been built and trials in Australia
The move represents the first attempt to implement
permissioned blockchain technology in a large-scale market.
"If the ASX 'flicks the switch', this would increase the
pace of innovation and disruption risk to the post-trade
securities market," said Morgan Stanley analyst Daniel P
Toohey, based in Sydney.
For ASX, blockchain deployment seeks to reduce market costs,
defend the clearing monopoly and grow new revenue streams (e.g.
data analytics, custody, registry and new tech).
Toohey reckons first movers, like ASX, may build a
competitive advantage and create opportunity for new revenue
pools, a differentiated offering and P/E premium.
Laggards could see lost revenues and their business models
Outside of Australia, Morgan Stanley reckons vertically
integrated exchanges operating in unfragmented markets seem
best placed to further shape the blockchain opportunity.
Names include Singapore Exchange, Hong Kong Exchanges and
Clearing, Japan Exchange Group, Moscow Exchange.
"While the future state of the world is unclear, post-trade
processes could see large changes," adds Toohey.
"Blockchain could catalyze a new area of post-trade
competition - most likely in data & analytics and
"In a more simplified value chain, custody (BNY Mellon,
Bolsas y Mercados, Deutsche Boerse, London Stock Exchange
Group, State Street) and registry (Computershare, Link Market
Services, Equiniti) functions may be impacted.
"Both registrars and custodians are also actively exploring
the threats and opportunities presented by blockchain."