ASXCD ASX Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--ASX Ltd. (ASX.AU), the operator of Australia's dominant securities exchange, has lifted its stake in the U.S. company it has turned to for the development of blockchain technology for equities market settlement.

ASX said Wednesday it would invest US$7.2 million in Digital Asset Holdings LLC, increasing its holding in the company to about 8.5%. It has also entered a commercial agreement appointing Digital Asset as its preferred partner to develop distributed ledger technology, also known as blockchain, for post-trade in the Australian cash equities market.

In January, the stock exchange paid 14.9 million Australian dollars (US$11.1 million) for a 5% stake in Digital Asset, funding its initial phase of development. That deal included a warrant to lift its investment, which would also give it the right to appoint a director to Asset Holdings' board.

Early last year, ASX laid out plans to replace or upgrade its main trading and post-trading platforms, including clearing and settlement of the equities market.

The system it currently uses for clearing and settlement in equities is known as Chess. ASX previously said it would work with the U.S.-based company to design a new technology while it continues to use Chess, and expected to make a final decision in 2017.

Blockchain, a secure database of transactions that take place within a network, is the key technology that underpins digital currency Bitcoin. Standards for regulated financial markets mean the design would differ from publicly available blockchain and would be based on a private network where the involved parties participate only by permission.

ASX executives including former chief executive Elmer Funke Kupper are proponents of blockchain, which they say may be able to simplify and speed-up post-trade processing significantly. The technology might also reduce back-office administration and compliance costs.

In a speech in Melbourne early this month, ASX Deputy CEO Peter Hiom said blockchain had great potential but there remained important questions regarding scalability, security and performance that had yet to be answered.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

June 22, 2016 03:33 ET (07:33 GMT)

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