NSX cites ‘substantial improvement’ and prepares for DLT-powered innovations

NSX ASX Digital Exchange Subregister System DESS
NSXA’s trade acceptance service is set for a go-live date of 23 November with the iSignthis Paydentity system to follow in early 2021.

NSX’s (ASX: NSX) subsidiary the National Stock Exchange of Australia (NSXA), the second-largest stock exchange only to the ASX, has published a performance update in which the company said it had improved “substantially” with several core technology updates set to go live in the near term.

In a statement to the market, the NSX also said interest from issuers and participants was “on the rise” and added that revenues were increasing.

The company reported a net cash inflow of $450,000 in the past quarter and said it had $5 million in cash on hand. During the third quarter, the NSX generated $1.4 million in cash receipts, compared to $200,000 in the second quarter.

Operationally, the past quarter saw NSXA receiving four new pre-listing submissions, one new listing application, one new nominated adviser application and two new participant applications.

It also cited “a number of new initiatives for revenue generation” and new products, that will be factored into its upcoming technology platforms.

“The forward pipeline for listings is now in the order of 30 applicants, with the volumes and interest appreciably starting to rise,” the company said.

Trade acceptance service going live

Just yesterday, the NSXA was buoyed by news that the ASX had made a formal lodgement of the ASX Clear operating rules to the Australian Securities and Investments Commission (ASIC), meaning the NSX could gain access to the ASX Clear monopoly on a commercial basis.

The news means the NSX’s looming integrations to the trade acceptance service (TAS) will go live on 23 November 2020.

According to the NSXA, the exchange will integrate its own internal Digital Exchange Subregister System (DESS), based upon distributed ledger technology (DLT), into its digital platform being built by Probanx Solutions, a subsidiary of payment identity specialist iSignthis (ASX: ISX).

The company’s platform incorporates NASDAQ’s trade matching engine, alongside the DESS. In future, the NSXA expects additional integrations such as the ClearPay Delivery versus Payments platform and iSignthis’s Paydentity KYC platform.

According to the NSXA, the DESS is set to be integrated with the iSignthis Paydentity system in early 2021, to provide compliance with anti-money laundering and countering financing of terrorism (AML/CFT) regulations relating to customer due diligence and electronic safe harbour.

Access to the system means the NSXA will be in a position to comply with the terms of its license for products not cleared via a licensed clearing and settlement facility and ensure that counterparties can be mutually notified.

The NSXA has previously confirmed that DESS will record trade data from its NASDAQ trade match engine in parallel to CHESS and will eventually allow the NSXA to operate autonomously from CHESS.

Furthermore, the NSXA confirmed it was in consultations with ASIC regarding when the DESS can commence service, noting that it is now “technically and operationally ready” for the service to commence data accumulation and writing to the blockchain, contemporaneously with TAS.

Following the consultation with ASIC, the commissioning of DESS will mean the NSXA will be able to independently store trading data and create its own user records, in order to provide issuers, registrars, participants and other parties access to the blockchain data, on a permissions basis.

As a sure sign that DLT and blockchain applications are engulfing the Australian stock market, the NSXA declared that the DLT will, in future, be used to confirm trades, transfers, and manage trade tracking.

The technology is aimed at eradicating “dark pools”, privately organised exchanges for trading securities and allowing NSXA to satisfy AML/CFT requirements by running sanction screening on trades in real-time using the buyers and sellers’ details.

Internal decisions

Regarding its internal operations, and as a possible sign of internal management – or mismanagement, depending on the view – the NSXA held two extraordinary general meetings (EGMs) in close succession at the end of August with resolutions to appoint additional directors failing to pass.

Moreover, the exchange then received an official notice to remove Thomas Price as a director with a further EGM scheduled for 30 October 2020.

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