Australian Securities Exchange’s (ASX) plans to become the first fully blockchain-enabled equity clearing marketplace suffered a major dent as London-based Calastone revealed on March 4, 2019, that it would switch to its own distributed ledger technology (DLT) platform in May 2019, reports Financial Review.
Calastone Eclipses ASX’s Transition to Blockchain
Calastone is a British financial solutions company that helps fund managers, distributors, platforms, and custodians the world over benefit from interoperable automated processing.
At present, Calastone solutions automate 80 percent of Australian institutional fund flows. By transitioning into a blockchain-enabled platform in May 2018, it will beat the ambitious target of the ASX to replicate the same by a good two years.
Currently, the ASX uses Clearing House Electronic Subregister System (CHESS) to settle the equity trades that take place on the platform. The exchange is scheduled to replace the CHESS mechanism with blockchain by March or April 2021, after a change in the initial deadline of Q4 2020.
Calastone’s commercial software is mainly used to manage back-office processes. The product is currently used by 95 percent of Australia’s managed fund platforms and about 67 percent of fund managers.
Calastone’s blockchain-based system, called the “distributed market infrastructure” (DMI) helps digitize order routing, trade settlement, and registry services. According to the company, the DMI can save close to $4.5 billion annually for global funds.
Edward Glyn, head of global client relationship management, Calastone, said:
“When we go live collectively and overnight [in May], we will literally become the world’s largest financial community operating on DLT.”
A New Era for the Equity Stock Exchanges
Regardless of who does the transition earlier, it cannot be denied that such a move was long due for an industry which has been lagging in terms of innovation.
For instance, with DLT-based infrastructure in place, investors will no longer be required to send computer messages to each other’s database as data available at any point in time can be relied on. Further, a dynamic database which continually updates itself based on the latest transaction recorded will eliminate the need for reconciliation and reduce human errors.
Campbell Brierley, the chief innovation officer of Calastone, stated that DLT is modernizing some of the most critical market functions by facilitating more efficient reconciliation and messaging services.
“We’ve been able to move faster, because Calastone’s technology already automates messaging and reconciliation involved in the trading and reporting of managed funds. Our move to DMI will enable further efficiencies and open up opportunities for future APIs and other capabilities as markets evolve.”