Clyde Rodriguez, CIO & CTO of EngineeringIn December 2017, the Australian Securities Exchange (ASX) made history when it announced its intention to use Distributed Ledger Technology (DLT) to replace their equities clearing and settlement system called CHESS. This move makes the ASX the first significant market infrastructure provider to commit to DLT as the underlying technology for mission-critical business processes.
It’s also big news for Digital Asset, or DA, the global software firm whose Digital Asset Platform, a DLT solution that uses blockchain technology, was selected by the ASX to replace the exchange’s post-trade infrastructure.
“Market infrastructures need to become more efficient and flexible to bring new products to market faster, develop new functionality and services for customers, and respond to the ever-changing regulatory landscape,” says Clyde Rodriguez, who joined the firm last year as its CIO & CTO of Engineering. “Our DLT solution enables innovation by mutualizing market processes across distinct participants, increasing transparency and analyzability of market data without sacrificing confidentiality and scalability.”
This can be a huge advantage to organizations like the ASX, because the siloed systems used in post-trade operations today to record transactions and account for the transfer of value pose many challenges due to the need to reconcile each transaction across these systems -- a costly and laborious process. DLT platforms are designed to give market participants a comprehensive and up-to-date view of market transactions on a shared ledger -- a single source of truth -- from which all participants can validate and confirm transaction and account status.
Rodriguez points out that working with the ASX on their CHESS replacement system has been a rare opportunity to build a product to real-world, production grade specifications right from the start. “By working hand-in-hand with the ASX, we were able to understand early on that some of our initial design assumptions would not meet the requirements of complex, systemically consequential markets. It gave us the opportunity to produce a platform that can satisfy the requirements of one of the world’s top-10 exchanges.”
In addition to their DLT platform, DA has developed DAML, a powerful language purpose-built for modeling financial contracts. DAML was specifically designed for distributed ledgers and eases the developer’s burden in turning complex, real-life, multi-party agreements into ledger code.
Our DLT solution enables innovation by mutualizing market processes across distinct participants, increasing transparency and analyzability of market data while still maintaining confidentiality and scalability
DA has been sharing the DAML SDK with a number of clients and partners so that they can build their own applications for the platform, and intends to widen availability to an increasing number of developers throughout the year.
Together, the DA Platform and DAML will enable financial institutions to rapidly introduce new products and make necessary changes as needed, a departure from the rigid and compartmentalized systems in use today. And since the platform seamlessly integrates with existing operational infrastructure, applications built on the DA Platform are future-proof and designed to minimize any disruption to existing trade and settlement workflow.
“Market governance is something that we’ve had to think a lot about as we build to the production requirements of a mission critical system,” says Rodriguez, who joined DA after serving as a co-CTO of major quantative hedge fund, Two Sigma. He also spent 20 years building enterprise software and cloud platforms at Microsoft. “Seemingly simple things like who defines the market rules and how they are propagated to the network become a lot more complex when dealing with a mission critical piece of distributed infrastructure. Working with the ASX is helping us prepare our platform to perform in the real world.”
To date, DA is predominantly known for its work building systems for central, highly-regulated authorities like the ASX and The Depository Trust & Clearing Corporation (DTCC), but its technology stack is equally applicable to more decentralized, open ecosystems. Going forward, Rodriguez says DA intends to address use cases beyond market infrastructure and post-trade operations. “The benefits of frictionless value transfer extend far beyond our current focus. As we solve the hard problems related to production deployment in one of the most technically challenging settings we intend to apply our insights and innovations to new markets,” he says.