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structure reaches obsolescence or
in areas that lack market infra-
structure,” says Palychata. “For
instance, we are also investigating
use cases for derivative contracts
or non-listed instruments that do
not benefit today from the same
level of automation than listed
products.”
As with any new hyped tech-
nology, there is also the further
challenge of harmonisation with
regulatory standards.
“It’s unlikely blockchain will
completely decentralise clearing
and settlement in the near future,
as there are many political, legal
and structural issues to address,”
says Summerville. “But what I do
expect to see is more centralised
structures applying DLT technol-
ogy. Eventually, I imagine that as
DLT technology evolves and is
used more widely in other indus-
tries, the market will become more
comfortable with the concept of
decentralisation, and with some
current DLT technology issues
addressed, the clearing and set-
tlement will eventually be seen as
essentially redundant.”
DTCC’s Peve agrees: “We believe
it is too early to predict the extent
to which DLT can be applied to
clearing and settlement. Any mar-
ket infrastructure provider looking
to apply DLT to an existing process
should collaborate and implement
best practices to prevent technolo-
gy silos from being created, which
could lead to the same reconcili-
ation and interoperability issues
experienced today.”
The future of clearing is open
to infinite possibilities but it will
require patience to get there.
Public Blockchain vs ASX
Private Permissioned Ledger
Public blockchain ASX private permissioned
ledger
Not applicable to highly regu-
lated markets Similar to today, but an en-
hanced database architecture
Unregulated Highly regulated market
˜ ˜ No restrictions on ability to ˜ ˜ Infrastructure providers
˜ ˜ Users are anonymous or ˜ ˜ Rule book defines market
˜ ˜ Limited rules and regulato- ˜ ˜ Participants identified and
Operated on the public
Internet Operated on a system within
a private network
˜ ˜ Access gained through ˜ ˜ Technology controls
˜ ˜ Exchange and user security ˜ ˜ Securities exist digital-
join and transact
pseudonymous
ry oversight
downloading software
not subject to scrutiny
˜ ˜ If compromised, holder
can unilaterally transfer
cryptocurrency anywhere
in a public network
with licences to operate
operation
meet regulatory standards
(e.g. KYC and AML)
retained
ly only within the ASX
register
˜ ˜ Cash remains within bank-
ing system
Data integrity Enhanced data integrity
˜ ˜ Access to cryptocurrency ˜ ˜ Equivalent or better
controlled by private keys
˜ ˜ Underlying technology has
inspired new applications
tailored for financial
markets
security of data
(cryptography)
˜ ˜ Multiparty authentication
and authorisation
˜ ˜ Creates a secure single
source of truth
Source: ASX
36 // TheTrade // Summer 2018
˜ ˜ Could provide significant
benefits to the industry