By David Ferrall, Founder and CEO of FinClear Group
The ASX’s delays in the CHESS replacement, now compounded by ASIC’s legal challenges, once again highlight Australia’s lag behind global markets, as they move swiftly towards T+1 settlements, with the US and Canadian markets being the latest to transition to the shortened settlement cycle.
As the issues surrounding ASX threaten to further undermine confidence in the national Exchange, and given the prolonged timeline for the CHESS upgrade, the situation calls for accepting innovative alternatives that can modernise Australia’s financial infrastructure and ensure it remains globally competitive.
And whilst the debate on CHESS replacement continues to rage, global financial institutions thunder ahead with new technologies. The integration of Distributed Ledger Technology (DLT) into financial markets has moved well beyond the Proof-of-Concept stage. Leading institutions like Broadridge and J.P. Morgan have already embedded DLT into their core operations, signalling a significant shift in how financial transactions are being executed. Broadridge, for example, is now transacting over US$1 trillion per month in repurchase agreements (REPOs) using its ledger platform, while J.P. Morgan’s digital coin is facilitating over US$1 billion in daily transactions. These figures are expected to grow exponentially as these technologies become further entrenched in the financial ecosystem.
This rapid adoption of DLT is not limited to REPOs. Large asset managers like Fidelity and Franklin Templeton are also moving swiftly to introduce tokenised funds, offering a glimpse into the future of fund management. Tokenisation promises to enhance liquidity, transparency and efficiency in markets that have traditionally been less accessible. As these technologies continue to mature, they are poised to revolutionise the financial services industry by providing a more efficient and secure way to manage assets.
In Australia, FinClear is on the frontline of this transformation with its FCX platform, which leverages DLT to provide a modern alternative for unlisted companies and funds. The platform is asset-agnostic, allowing it to support a wide range of investments, from traditional assets to emerging alternatives. FinClear’s vision aligns with global trends, particularly as high-net-worth investors (HNWIs) are expected to significantly increase their allocation to alternative assets. According to BlackRock, the allocation to alternative assets in HNWI portfolios could rise to 20%, a substantial increase from the current average of 3%. FinClear believes that these allocations will be increasingly delivered in a digital and tokenised format.
The potential for tokenised investment products in Australia is immense, especially given the growing preference for new methods of asset exposure, as evidenced by the rapid adoption of Exchange-Traded Funds (ETFs) in public markets. The unlisted managed fund sector, currently under pressure due to advent of ETFs, could see a similar transformation. Tokenisation could surpass even the success of ETFs by offering private market opportunities in a more efficient and real-time manner than public markets can provide.
Furthermore, the modern infrastructure enabled by DLT could reduce the overall cost of investment products, leading to greater diversity and accessibility in financial markets. This aligns with FinClear’s belief that the tokenisation of both traditional and alternative assets represents a once-in-a-generation opportunity to bring efficiencies to financial markets, particularly in the funds management sector.
Our conversations with large global and domestic fund managers suggest a growing recognition of the potential for tokenised products to reshape the investment landscape. As Australia grapples with the delays in the ASX’s CHESS replacement, FinClear’s FCX platform could serve as a blueprint for modernising the country’s financial infrastructure, ensuring that Australia remains competitive in the rapidly evolving global market. The time to act is now, as the window of opportunity for Australia to lead in this technological transformation is narrowing.
