Nasdaq helps ASX with post-trade technology upgrade

The Australian Securities Exchange (ASX) and Nasdaq have announced a partnership that will see Nasdaq replace ASX's existing equity options clearing technology platforms.

Under the deal, ASX said the technology will be developed on Nasdaq's Genium INET clearing platform, which is already being used by the organisation for futures clearing.

The organisation also reported Nasdaq's post-trade risk management solution, Sentinel Risk Manger, has now gone live, with its default management component now in operation as part of phase one. According to the ASX, the next phase of the project will see the full implementation of the solution, which will provide a single, real-time risk management system across both its clearing houses and all asset classes, including real-time margin calculation and related customer risk analytics.

ASX CIO Tim Thurman said the post-trade phase of the technology refresh will help the organisation gain benefits including increased flexibility, reduced complexity, and scale efficiencies.

The update comes as the ASX and US-based firm Digital Asset are in the middle of developing solutions for the Australian equity market using blockchain technology, the underlying system that facilitates transactions such as bitcoin trading.

Phase one of the program will involve replacing the ASX's existing trading and risk management system, which is expected to run to the end of 2016. Meanwhile, phase two will focus on the revamp of the ASX's post-grade services, including clearing and settlement of the cash equities market.

The initial development will take six to 12 months, when the solution is expected to demonstrate the benefits for a range of users including investors, listed companies, and intermediaries.

A final decision on market design will be made by mid-2017, and will include a decision on the future of Clearing House Electronic Subregister System (CHESS), which is expected to continue to operate as normal during the development of the blockchain technology.

CHESS is the computer system that the ASX uses to record shareholdings and manage settlements of share transaction.

"While we have announced that ASX is exploring the potential of distributed ledger technology -- or blockchain -- to transform settlement processes in our market, we will continue to operate our existing post-trade services as normal," Thurman said.

"This extension of ASX's long-standing and successful partnership with Nasdaq will ensure that Australia's financial market infrastructure remains world class and meets the needs of participants and investors."

In February, the ASX said it expects 2016 full year guidance operating expenses to grow by approximately 5.5 percent as it plans to accelerate its technology transformation program.

During 1H16, operating expenses were up 4.4 percent to AU$85.1 million during the six-month period. Specifically, depreciation and amortisation expenses increased 12.2 percent to AU$20.8 million. The ASX said this was due to the increased capital investment in prior periods in new services, as well as ongoing technology maintenance and refresh of existing platforms.

The group also incurred AU$18.7 million on capital expenditure during the half year, compared with AU$13 million in the previous corresponding period. ASX said the expenditure was focused on the company's technology transformation program, which involved replacing its futures and cash marketing trading platform that is currently underway, as well as enhancing its risk management platform.

The enhancements are due to be completed, according to the ASX, during the calendar year.