Sydney Stock Exchange's blockchain system targets venture capital funds, commodities

Two-year-old Sydney Stock Exchange is building a blockchain settlement system to avoid high ASX fees and build a market for venture capital funds to exit their investments and commodities markets.

The distributed ledger will initially only be used to settle trades in private companies, but once regulatory approval is gained, it will settle trades in publicly listed stocks.

SSX will promote the new settlement system as a low cost alternative to the ASX to try to attract private equity funds to exit their investments by listing on the SSX.

Settlement instantaneous

Once complete in early 2018, SSX hopes to sell versions of its system – which is being built with the help of consultants Bit Trade Labs – to small commodities exchanges, many of which have settlement times of up to a month. SSX settlements will be virtually instantaneous.

“We will start with a private secondary equity market for venture capital and crowdfunded startups to register on our exchange,” said SSX’s chief consultant on the project, Loretta Joseph.

She said SSX had been working on the project for a year but claimed the government’s move to open competition in clearing and settlement encouraged them to do it.

“We will then move to a public secondary market. VC and crowdfunding are private little markets. It will give them another market that they can come to.”

Target other markets

She said it would then look to licence what they build to other small inefficient markets.

“A lot of these commodities markets are very inefficient, with some at T+30. And a lot of them are still paper based.

“SSX’s version of blockchain will be a “public” distributed ledger, meaning it will be open to any company or broker to use it. The original Bitcoin blockchain is also a public ledger.

This is a different path to the ASX, which is looking at replacing its existing clearing and settlement system with a private blockchain with a limited and known number of participants.

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Source: Sydney Stock Exchange’s blockchain system targets venture capital funds, commodities