How SA stock exchanges could incorporate blockchain technology

Nasdaq and Strate have announced an agreement that will see Nasdaq deliver a new blockchain-based electronic voting solution to the South African capital markets.

The solution will allow Strate, in conjunction with key stakeholders in the market, to provide general meeting services and give shareholders an easy, user-friendly and secure tool for voting remotely.

Strate is South Africa’s Central Securities Depository, and is licensed to be an independent provider of post-trade products and services for the financial markets. In essence, alongside a number of other duties, Strate is responsible for tracking and reflecting all transactions on South Africa’s four stock exchanges.

Fractal is a subsidiary created by Strate to investigate new technology, and was created due to increasing fears that a company such as Strate may no longer be required as an “intermediary” as blockchain technology becomes more popular.

“We are very excited about our initiative with Nasdaq and what it means for the South African financial markets,” said Tanya Knowles, managing executive of Fractal Solutions, a division of Strate (Pty) Ltd.

“One needs to understand that the environment at the moment is very administratively intensive, which means there are many inefficiencies and risks associated with it,” she said.

“This is not ideal in today’s electronic age, as technology like blockchain can serve as a solution.

“The solution aims to service our clients’ needs across the market from transfer secretaries to issuers, custodians, asset managers and those holding shares in listed companies.

“Given that it is an end-to-end solution – from the time a meeting is announced and all the way through the voting process to the publishing of results – it means that all stakeholders will truly benefit within the process.”

A look at the technology

While this new technology is primarily focused on shareholder meetings, earlier this year BusinessTech was invited to see a full demonstration of what the technology could mean for SA markets.

To begin with, each attendee was given login details to access the application on their smartphone.

Once logged in, the scenario is simply that of buying and trading shares as a member of a stock-listed company. Each attendee was given a number of “CryptoRands” as well as fake assets to trade with one another.

Attendees could then select one of the members on the list to offer to trade with and could then offer to buy or sell their assets for any amount that they wanted.

While buying and selling shares on the JSE can take up to three days to reflect, buying and selling on this blockchain would take less than 10 minutes. In addition there is no need for any intermediaries or formalities because of the secure nature of the blockchain.

The app also had a built-in meeting system tying into the idea of owning shares in stock market listed company. Effectively this could be used to replace the current arduous AGM voting process used by companies and allow for shareholders to vote on business motions almost immediately.

This demonstrates the same transfer of secure data, but instead of sending financial transactions in the form of buying shares, the secure data is votes in a company meeting.


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How SA stock exchanges could incorporate blockchain technology