The London Stock Exchange (LSE) is making its first move into the cryptocurrency sector following a collaboration with Hong Kong based digital asset exchange, AAX.
According to a press release issued by the LSE earlier today, the deal will result in the UK stock exchange selling some of its trading technology to AAX. The technology – trade marked by the LSE as ‘Millennium Exchange’ – is a matching engine system which will be utilized by AAX following its launch. The LSE claim the tech was developed to act as a low-latency, resilient and scalable solution to support new markets and new asset classes.
AAX is being brought to market by ATOM Group – a global fintech company based out of Hong Kong – with a focus on emerging digital asset classes and blockchain technologies.
Ann Neidenbach – Chief Information Officer (CIO) at LSE suggested that the company were happy that ATOM chose its technology for the digital asset exchange platform on the basis that the tech provides the best in class solution to power a new exchange. “It underlines Millennium Exchange’s reputation for performance, scalability, flexibility and reliability and we look forward to working with the AAX team ahead of the launch in H1 2019”, she added.
Peter Lin, CEO of Atom Group also commented on the announcement:
“Trust is at the heart of ATOM’s philosophy and we are delighted to be working with LSEG Technology to deliver a world-class exchange that ensures safe, trusted and secure digital asset trading for all. The AAX exchange will allow investors to trade all major digital assets with greater levels of fairness, transparency and performance.”
Whilst it is the LSE’s first collaboration in terms of the use of their technology on a digital asset exchange platform, the company is otherwise familiar with the incorporation of its technology within other platforms in the financial services sector. Its technology is used by more than 40 financial market infrastructure and financial services companies. Amongst these are the Hong Kong, Singapore and Johannesburg stock exchanges – alongside TP-ICAP and other markets globally.
The major players in the conventional markets have woken up to the potential in the cryptocurrency sector. The Global Head of Sales and Marketing at the LSE – Lorna Chambers – told the Financial Times that “if you look at the traditional market, there is a limited number of traditional exchanges, but there are a number of crypto exchanges springing up.”
Investment in digital assets – inclusive of venture capital investment – reached $24.4 billion in 2018, doubling the rate of investment from the previous year. With that, the market incumbents are not inclined to ignore the sector any longer. From the point of view of the cryptocurrency sector, it should be a positive development.
There is a lot of distrust on the part of investors in relation to cryptocurrencies. Rightly so, given a myriad of security breaches and crypto heists. Its thought that the majority of institutional money will not embrace the sector fully until recognized established names in financial services enter the market. LSE’s involvement should serve to provide confidence.
“One of the things we see in crypto is a lot of people have built their own technology. One of the things we need moving forward is to bring in more technology from regulated markets to make sure this is safer for investors.”
This development is a new departure for the LSE. However, many of its competitors have already gotten involved. Nasdaq has invested in ErisX – an intermediary friendly, CFTC regulated futures exchange in the digital assets space. Its also expected to launch its own Bitcoin futures product in Q1, 2019. Additionally, CEO Adena Friedman stated recently that she sees a significant role for digital currencies in the future.
Borse Stuttgart in Germany has partnered with solarisBank with a view towards developing a trading system relative to cryptocurrencies and digital assets. The owners of the New York Stock Exchange (NYSE), Intercontinental Exchange (ICE) has established Bakkt – a Bitcoin futures trading platform which is expected to launch later this month.