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Blockchain Trading Greenlit for Asia’s Largest Stock Exchange Operator

Samburaj Das on 09/01/2017

Japan’s Financial Services Agency has allowed the Japan Exchange Group, operator of the Tokyo Stock Exchange, to use financial technologies like blockchain as its core trading infrastructure.

The country’s financial regulator will now begin approving Fintech adoption on a case-by-case basis, according to a review in Nikkei.

Previous regulation meant that JPX subsidiaries were limited to activities linked to exchange operations. The new and updated interpretation of the rule, however, allows the JPX to introduce technology that improves the operational efficiency of trading platforms.

It is notable that the JPX has already begun developing blockchain applications for stock exchange operations. The exchange operator announced a partnership with IBM Japan for blockchain applications and experiments as early as February 2016. Trials began the following month in March, wherein proof-of-concepts (PoC) tests ran for clearing, settlement and other exchange operations in an artificial sandbox environment with sample securities. The test environment used code from teh open source Hyperledger platform led by the Linux Foundation.

Big on Blockchain

The tests were enough to convince the operator to form a wider Japanese blockchain consortium with the aim to develop solutions for capital market infrastructure. PoC testing among participants of the consortium will begin in Spring 2017 within its environment. At the time of launch, the Tokyo Stock Exchange (TSE), the Osaka Exchange (OSE) and the Japan Securities Clearing Corporation (JSCC) were all among the founding members.

Bitcoin trading

Japan could soon see trading done over a blockchain.

Further, the JPX’s fervent interest in blockchain applications has already seen adoption in Myanmar, connecting the Yangon Stock Exchange with other local brokerages in the country. The JPX helped establish the Myanmar stock exchange following a joint venture agreement with the Myanmar Economic Bank and talks with the Myanmar government are already underway to introduce the technology in payments for stock trading in the country.

The marked effort toward blockchain adoption by Japan’s biggest stock exchange operator follows other notable endeavors that have already seen real-world testing of the innovation.  The Australia Stock Exchange (ASX) is perhaps the most notable example of a stock exchange operator implementing a blockchain-based solution to run alongside its existing clearing system with the eventual aim to replace the latter in its entirety. Developed by New York-based industry startup Digital Asset Holdings (DAH), the ASX also holds a 5% equity interest in the firm for AUD $14.9 million.

Nasdaq is another exchange operator that has thrown its weight behind blockchain-based trading, with the launch of Linq, a trading platform that enables private companies to trade shares over a distributed ledger.

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