NSX Limited, the operator of the National Stock Exchange of Australia (NSXA), is working on a joint blockchain-based project to enable same-day settlements.
According to a Feb. 20 announcement, NSX has partnered with iSignthis (ISX), a publicly listed firm specializing in payment authentication services, to establish a new venture that would provide “multicurrency, real-time and same day clearing of share trades across multiple exchanges.”
CHESS system will meet new competitor, DESS
Dubbed ClearPay, the new venture will develop a delivery versus payment (DvP) platform that is designed to replace the existing system of clearing and settlement process offered by current traditional domestic and foreign stock exchanges.
Using distributed ledger technology, ClearPay is expected to cut settlement processing time from three days to same-day or early the next day. Additionally, the development will also incorporate an open blockchain-based sub-registry system.
According to the official announcement, ClearPay’s blockchain-based Digital Exchange Subregister System (DESS) will essentially be competing with Australia’s first-ever blockchain sub-registry platform, known as the Clearing House Electronic Subregister System, or CHESS. Initiated back in 2017 by the Australian Security Exchange, CHESS has apparently become a subject of concern due to its monopoly in the market.
ISignthis to provide its KYC expertise for ClearPay
While NSX will initially invest $3.2 million for a 41% stake in ClearPay, iSignthis will hold an initial 59% interest. As part of the collaboration, iSignthis will contribute intellectual property, while its subsidiary Probanx Solutions will design the DvP platform for a fee, including the integration into Paydentity and ISXPay platforms.
John Karantzis, managing director and CEO at ISX, who will also act as CEO of ClearPay, elaborated that iSignthis will contribute its payment and Know Your Customer (KYC) services as its main area of expertise. Karantzis also emphasized that the new venture will bring competition to the Australian market:
“It’s very exciting for us that the ClearPay JV will bring genuine competition to the Australian cash equities eco-system. iSignthis brings an inherent high technology capability to the NSXA, including its extensive payments and KYC services, ISXPay and Paydentity.”
ClearPay’s regulation terms
Additionally, the DvP platform will be initially operating under DvP model 1, a securities settlement mechanism provided by Bank of International Settlements. ClearPay will not seek a Clearing and Settlement Facility Licence because the products NSXA offers for ClearPay will be subject to counterparty identification and verification via Paydentity, with a public order and settlement book creating the so-called “Lit Exchange.”
As reported by Cointelegraph in October 2019, the Australian subsidiary of market operator Chi-X asked the country’s competition regulator to look into the implications of the Australian Securities Exchange’s CHESS system for trading activities.