Daily Bulletin


The Conversation

  • Written by Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University
image

What a difference a year makes.

In January 2016, ASX was bathing in the warm glow of having been acclaimed by Blythe Masters, an American super saleswoman and head of a Blockchain start-up called Digital Asset

“The work we have done with ASX to date indicates that Australia has a unique opportunity to be a world leader in the adoption of Distributed Ledger Technology. We expect the solution that Digital Asset can deliver will bring significant benefits and exciting new business opportunities to ASX and the Australian market.”

At that, ASX management duly rolled over to have their tummies tickled and coughed up some A$14.9 million to take a 5% stake in Digital Asset, which works out valuing the company (which had no real products at that stage) at a whopping A$300 million.

But what is $15 million, when the savings to the industry on the whole are potentially in the billions, the opportunities appear limitless. And the government were overjoyed that the ASX had joined its innovation revolution. The euphoria for all things Blockchain was palpable.

The reason that ASX signed up for the Blockchain revolution was that it has for years been delaying the replacement of its 20 year old CHESS clearing system and, according to all of the hype, the new technology looked a certain winner.

And in June, happy with the progress of their proof of concept tests on CHESS the ASX went boots and all and ponied up another A$7 million and a seat on the board of Digital Asset. Meanwhile one of the big supporters of the deal, ASX CEO, Elmer Funke Kupper, resigned in March for an unrelated reason. However, his replacement, Dominic Stevens, stuck with the program.

But why Digital Asset?

Last January Digital Asset and its high-flying CEO, Ms Masters, were the best game in town, despite having no real products to sell yet. But as the song says, “On Broadway (or at least Wall Street) there is always magic in the air.”

In January 2016, Digital Asset was working with one of the biggest players on Wall Street, the Depository Trust & Clearing Corporation (DTCC) which is the major clearer of US, and increasingly overseas, securities.

For the ASX, 2016 was the year of jetting around and spruiking the benefits of blockchain in the media and at conferences.

But by September, teensy weensy clouds began to appear as ASX experienced technical problems with its current trading systems. The exchange’s one and only regulator, ASIC, was not happy. If you cannot manage the shop today, why embark on a wild-goose chase was the none too subtle message.

2017 is already proving to be the year of surprises, not all welcomed.

Just a few days into the New Year, the DTCC dropped a bombshell – for its own clearing systems “replacement” the DTCC was going with an almost unheard of start-up called Axoni – who? Who indeed.

And the replacement described was not really a replacement for its existing clearing systems, which were to remain substantially as is. Rather it was a new way for market participants to connect to the DTCC, and those that didn’t want to join, could just continue as usual anyway. Hardly the revolution envisaged.

But worse, the Blockchain envisaged by the DTCC had been so mangled that it wasn’t even Blockchain lite, resembling more an existing software pattern known as a “message bus.”

What of Digital Asset? Well they got a runner’s up prize, continuing to work with DTCC on a proof of concept on clearing repurchasing agreements (REPOs) - always the bridesmaid?

And what of the ASX?

ASX management took a punt on Digital Asset becoming the major player in the Blockchain clearing systems market, but they were upstaged by a novice. What does that say about their ability to deliver their vision? At best the ASX stake in Digital Asset is on an outsider with a bad barrier draw.

As the song, says “On Broadway, the glitter rubs right off and you’re nowhere”.

Having wasted yet another year putting off replacing the ageing CHESS clearing system, ASX management have a tough decision to make – where next?

Let’s hope they don’t fall in the trap of the “sunk cost fallacy” - the management tendency to throw good money after bad in the (often vain) hope that a problem can be solved with just a little more effort.

Authors: Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University

Read more http://theconversation.com/what-next-for-the-asx-and-blockchain-in-2017-71472

Writers Wanted

Why some people find it easier to stick to new habits they formed during lockdown

arrow_forward

Why is it worth playing at an online casino?

arrow_forward

What is Self-Education? + 4 Ways to Improve Yourself

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Scott Morrison: the right man at the right time

Australia is not at war with another nation or ideology in August 2020 but the nation is in conflict. There are serious threats from China and there are many challenges flowing from the pandemic tha...

Greg Rogers - avatar Greg Rogers

Business News

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable

InteliCare triple winner at prestigious national technology awards

InteliCare triple winner at prestigious national technology awards Intelicare wins each nominated category and takes out overall category at national technology 2020 iAwards. Company wins overal...

Media Release - avatar Media Release

Arriba Group Founder, Marcella Romero, wins CEO Magazine’s Managing Director of the Year

Founder and Managing Director of the Arriba Group, Marcella Romero, has won Managing Director of the Year at last night’s The CEO Magazine’s Executive of the Year Awards. The CEO Magazine's Ex...

Lanham Media - avatar Lanham Media



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion