ASX details timeline, features for new blockchain-inspired system

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According to someone more boned up on the topic than your columnist, self-executing digital contracts have been around since at least - when Paul Keating still ruled the land with his colourful invective.

The premise of a blockchain contract is that if a prescribed event occurs, then a certain action is taken. Unlike a standard paper contract that is enforceable by law, such smart contracts are enforced by cryptographic code and are executed in line with predetermined, programmable rules. One example is estate planning: In this case, the family benefits from reduced processing fees, the elimination of lawyers and trustees from the process and increased transparency and reduced human error.

This means smart contracts can disrupt existing services that have speed bottlenecks such as international monetary transferor act as intermediaries in complex situations involving regulation and numerous parties such as an advertising buying agency.

Blockchain is also relevant for trusted intermediaries, such as trustees and public sector services. Although predicting the future remains the domain of clairvoyants, we do our best to identify the winners and losers over the medium term. For banking customers, the speed to settlement is a major drawcard of smart contracts.

Aligning loan approval with drawdown access will be of great benefit in a variety of consumer use cases. A likely scenario is that consumers will hold smart contracts containing their personal data, along with encryption keys to share that data with other providers. Another benefit is that credit checks would be verified through a decentralised ledger and consumers with a stronger credit history that is, about half the population would receive more competitive offerings.

Companies that are dominant in their market have an incumbency advantage over new entrants when it comes to developing smart contract technology.

This will reduce trading costs and settlement time, while accentuating barriers to entry for aspiring rivals. Property owners will be able to connect directly with prospective tenants and verify their identity, rental history and financial means. Companies such as Freelancer. Other winners are those who build IT and telco networks, given the need for more computer power and data transfer. On the flipside, likely losers are service companies that are a conduit between customer and supplier.

PEXA, which plans to list this year, has done a good job in disrupting an archaic property transfer market. But it may face headwinds if legal software house InfoTrack decides to invest in an electronic property settlement platform, based on smart contract technology. The share registries Computershare CPU and Link Administration face clear and present pain if private ledgers become the norm.

Both companies have taken steps to try to weather the oncoming smart contract storm, but it remains to be seen what role a third-party ledger administrator would play between market participants and exchange operators.

Through standardised technology approved by the regulator, companies may be able issue smart contract shares directly to shareholders. Each smart contract would correspond to one share and would have the same existing shareholder rights written into its code such as voting, dividends and transfers.

Intellectual property companies had better watch their backs too, because the recurring fees charged over the life of a trademark and patent could vanish. The companies covered in this article unless disclosed are not current clients of Independent Investment Research IIR.

Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense. Many readers will remember Boreham as author of the Criterion column in The Australian newspaper, for well over a decade.

Chloe Stokes Forager Funds. Arik Star Ellerston Capital. Weimin Xie MX Capital.

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The Australian Stock Exchange is by its own admission standing at the bleeding edge of innovation with a blockchain-based replacement for its post trade settlement system.

The organisation last week released its industry consultation paper providing more detail about the new platform. That gives important guidance for industry about when it needs to be ready, and the systems it will need to connect to the new platform now slated to go live late in or early in Developed in association with New York based Digital Asset, the ASX greenlighted the distributed ledger technology blockchain project late last year.

CHESS Clearing House Electronic Subregister System was developed in the early s, and was one of the first systems in the world able to dematerialise shares through digitisation. The blockchain system being constructed will have ASX host a central database, while exchange participants will take a node to that database, to confirm instantly that their records match those of the ASX. But he also sees the new platform as an innovation engine for the entire financial sector in Australia.

It allows technology to flourish on top of the platform. The consultation paper is the result of a year-long process involving six working groups that explored what the industry wanted from the new platform, before narrowing that down to the 50 business features that the industry most wanted. It outlines which of those features will be available on day one and acts as a roadmap to the future.

Mr Stevens says that once the platform is completed, it is envisaged there will be months of parallel running to iron out any bugs before CHESS is finally decommissioned. Ultimately he suspects a similar blockchain based solution could be developed for the Austraclear bonds platform. This is the next stage of that. We have to create a new CHESS and our system is better than those around the world because it has a lot more information in it.

Mr Stevens says the ASX decision to go with blockchain has also upped the innovation ante for the local offices of international finance companies which connect to the ASX. While both ASX and ASIC use sophisticated data analysis platforms designed to sniff out unusual trading patterns that might point to insider trading, Mr Stevens says the ASX is also interested in technology to make sense of market announcements and determine what is and what is not considered material.

That short cable ensures everyone has equal access and experiences the same latency which is critical for high speed trading. Technology companies with a good story to tell though will find a receptive local market he said. With more than technology companies listed on the ASX it is big enough to attract investor interest, but not so big that local companies get lost as they might on larger international exchanges according to Mr Stevens.

A great example is WiseTech. Powered by Hello Espresso. Submissions regarding the consultation paper are sought by 22 June. Upcoming Events Register Now. Civic Nation 23rd August. Credibility, Impact and Influence. A high powered group of technology executives from government and the private sector say that in the fast moving game of digital transformation care needs to be taken with how traditional operational IT teams react with innovati ACCC platforms inquiry heats up.

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