By Paul Stonham, BTC Markets
Late last month I attended the annual Stockbrokers and Investment Advisers Association (SIAA) conference in Melbourne, where I joined a panel discussing Digital Assets, Stablecoins and Tokenisation. Our closing message was that this is a technology evolution, not a reimagining of asset movement. The fundamentals of financial services, trust, client asset protection, settlement, custody, remain unchanged. The technology simply delivers them in a new way.
One conversation that stayed with me was how many stockbrokers and advisers are now thinking about how to safely give their clients access to traditional crypto products, whilst also preparing for the tokenisation of real-world assets.
It took me back to my time at the Sydney Futures Exchange (SFE) and ASX, educating and selling to international brokerage firms, CTAs and hedge funds on the benefits of connecting to Australia’s financial markets. The one point that always resonated was Australia’s regulatory landscape. Almost all firms were comfortable with the risk of sending orders into Australia’s regulated markets because they trusted Australia’s laws, Australia’s regulators and exchange rules. If something went wrong, they knew they’d be heard and there were strong regulatory frameworks supporting them.
That got me thinking about what I’d be asking today if I were an Australian stockbroker or adviser evaluating a connection to crypto or digital asset markets. The parallels with how SFE and ASX expanded their global connections are striking.
The questions I’d be asking
- Am I connecting to an Exchange or a Broker? An Exchange holds a Markets Licence, operates a market and matching engine. A Broker holds an AFS Licence and routes orders to an Exchange. These are fundamentally different relationships.
- What legal jurisdiction governs the company I’m connecting to? Is it a jurisdiction I trust to do the right thing when something goes wrong?
- Are they licensed, and with what? Is the licence type one I’m genuinely comfortable with?
- Where are my client funds and assets held? Do they move offshore? Are they ever converted to a stablecoin to execute a trade? Am I comfortable with this if something goes wrong?
- Where do my client orders go when they hit enter? Where is the matching engine? The location of the matching engine is not always the same as the licence holder, always verify this.
To put it in practical terms
- Connecting to an ASIC-licensed Exchange operating in Australia is like connecting to ASX, Cboe Australia or NSX, a direct relationship, direct access to operations and decision makers.
- Connecting to an ASIC-licensed Broker routing to an overseas licensed exchange is like connecting via a Broker or FCM to NYSE, Nasdaq or CME, you are a client of the Broker, not the Exchange.
- Connecting to an ASIC-licensed Broker routing to an unlicensed overseas venue requires extended due diligence on that venue.
- Connecting to an ASIC-licensed Broker routing to a more exotic jurisdiction, say, the Cayman Islands, means you are one step further removed again, with no direct relationship and no guaranteed recourse.
The technology behind digital assets is evolving fast, but the fundamentals of financial services are not, trust, client asset protection, settlement and custody remain the foundation.
Before connecting to any new market, the question every stockbroker and adviser needs to answer is the same one we asked back on the trading floor: if something goes wrong, can I be heard, and can I be made good?
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