Tel Aviv Stock Exchange Eyes Clearing, Settlement Upgrade to Support DLT

Today the Tel Aviv Stock Exchange (TASE) announced its intention to upgrade the clearing and settlement systems of the TASE Clearing House. It plans to include “innovative models powered by groundbreaking technologies”. Generative AI, DLT and cloud were mentioned as potential technologies to be included.

It has commissioned Oliver Wyman to review the business, technology and regulatory trends with a view to setting the goals for the system. The business requirements are the focus of the first phase, with the technology needs to be explored in the second phase.

However, one of the business requirements mentioned in today’s document was the support of digital assets. In 2022 TASE laid out a five-year strategy that included plans for DLT, digital assets and crypto. Since then, it ran a trial for a blockchain-based government bond issuance. Plus, in 2023 it announced that TASE brokers could provide certain cryptocy services to their clients.

TASE Clearing House already has at least one live blockchain system. In 2020 it launched a blockchain-based securities lending system based on Hyperledger Sawtooth. Today’s document noted the need to be able to integrate with DLT infrastructures, either directly or in other ways. The clearing house would also need to provide direct or indirect support for digital assets. The activities include:

• digital asset custody
• clearing & settlement
• access to liquidity solutions
• tokenization
• payments
• staking services
• stablecoin and CBDC support, and
• interoperability solutions.

Australia’s ASX infamously pursued an entirely blockchain-based clearing and settlement system, CHESS, which was abandoned in 2022 after spending around $170 million. It attracted criticism relating to ASX’s project management, as well as the project’s design and complexity. Regarding design, Accenture said a key issue was that the entire system was based on DLT and smart contracts, whereas it may have been more appropriate to use DLT strategically.

During the development, there were major distractions from industry players who were concerned about being disintermediated. They made competition complaints. However, that was 2022 and the sector has matured considerably since then. Coming back to Israel, TASE is also keen to get input from the public and stakeholders and hence has invited input.