NSX Limited, the operator of the Australian National Stock Exchange (NSXA), is working on a joint blockchain-based project to allow same-day settlements.
According to a February 20 announcement , NSX has partnered with iSignthis (ISX), a publicly traded company that specializes in payment authentication services, to establish a new company that would provide “compensation of multiple currencies, in time real and on the same day for stock trading through multiple exchanges. ”
The CHESS system will meet the new competitor, DESS
Called ClearPay , the new company will develop a delivery versus payment (DvP) platform designed to replace the existing system of clearing and settlement process offered by current national and foreign traditional stock exchanges.
By using distributed registration technology, ClearPay is expected to reduce the settlement processing time from three days on the same day or early the next day. In addition, the development will also incorporate an open sub-registry system based on blockchain.
According to the official announcement, the ClearPay Blockchain-based Digital Exchange Subregister System (DESS) will essentially compete with Australia's first blockchain sub-registration platform, known as the Clearing House Electronic Subregister System, or CHESS. Started in 2017 by the Australian Stock Exchange, CHESS has apparently become a matter of concern due to its monopoly in the market.
iSignthis will provide its experience in KYC for ClearPay
While NSX will initially invest USD 3.2 million for a 41% stake in ClearPay, iSignthis will have an initial 59% stake. As part of the collaboration, iSignthis will provide intellectual property, while its subsidiary Probanx Solutions will design the DvP platform for a fee, including integration into the Paydentity and ISXPay platforms.
John Karantzis, CEO and CEO of ISX, who will also act as CEO of ClearPay, explained that iSignthis will contribute to its payment services and Meet Your Client (KYC) as its main area of expertise. Karantzis also emphasized that the new company will bring competition to the Australian market:
“It is very exciting for us that ClearPay JV will bring genuine competition to the Australian equity ecosystem. ISignthis brings an inherent high-tech capability to the NSXA, which includes its extensive payments and KYC, ISXPay and Paydentity services.”
ClearPay regulation terms
In addition, the DvP platform will initially operate under the DvP 1 model, a securities settlement mechanism provided by the Bank for International Settlements. ClearPay will not seek a Clearing and Liquidation Center License because the products that NSXA offers for ClearPay will be subject to identification and verification of the counterparty through Paydentity, with a public order and settlement book that creates 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 study the implications of the CHESS system of the Australian Stock Exchange for commercial activities.