‪@finclear‬

Captions as YouTube publishes them, usually machine-generated, so names such as Daml and Canton can be misheard.

1. 0:04

   hi everyone my name is Max developer Advocate at digital asset thank you everyone for joining this master's class session today we have David from finclear a sydney-based fintech company that provides trading clearing and Settlement Services for listed companies specifically though today we're going to be exploring the private share registry space in context of distributed Ledger technology so I'll have David introduce

2. 0:33

   himself and give us a little bit more details on what finclear does and its business vision Thanks Max and uh thanks for everyone for joining us today so yeah my name's David Farrell I'm the founder and CEO of finclear uh fin clear is seven years old uh and as Max said we are a execution clearing and settlement business here in Australia we're a very broad business uh we cover broad cross-sections of the

3. 1:03

   market from providing SAS solutions to large Banks like commsec CBA through to what we call mid-tier stock Brokers the likes of ordman at Shore and partners counter called Evans uh through to wealth managers and and some fintech players that use our pipes and what we call our pipes and plumbing as well the likes of superhero and um and steak we execute clear and settle we think from a retail perspective or we touch somewhere between

4. 1:36

   15 and 50 of all retail transactions that go through the ASX 6 on any given day we sit on about 130 billion of client assets all held directly about half a million end clients and and we use um I guess a broad Suite of technology to support that what we call Our Heritage business wow yeah so you know that's a lot of services that you guys are providing right and is it safe to say that everything that you've mentioned right now applies to mainly publicly listed companies and and I'm

5. 2:16

   asking this because I want to kind of focus on the FCX platform and I believe the FCX platform is the one that is partnering um or using the tech stack that digital asset provides yeah could you give a little bit more color on FCX yeah absolutely so yeah you're right our existing business is is obviously very Broad and and to listed Securities using current infrastructure here here in Australia so we're a chess participant

6. 2:48

   here working with the ASX but what we saw was an opportunity to use distributed Ledger technology we have a team already looking at developing into the chest replacement here ASX that's obviously using digital asset for that replacement project and because of that some some time or some years ago we started looking at the technology in the application of private markets now you know why private markets because it's completely divorced from what we what

7. 3:20

   we're doing well first and foremost it's it's a solution to a problem so what we're talking about here is building a a platform a capability to host and provide a more efficient ecosystem for unlisted companies here in Australia so first and foremost it's a registry capability or a cap table management then we start to add tools like automated Capital raising tools for primary and secondary events and then ultimately we'll look to become a

8. 3:55

   liquidity venue in our own right what's called a tier 2 exchange here in Australia it's important to note that while this is an opportunity for us to to solve a known problem and we think that we're going to be successful in this space the actual driver was because we are a very mature market and we are a large and and sort of Highly trusted counterpart underpinning large parts of the market we wanted to use this technology in a

9. 4:26

   way that we can look to develop what we call Our Heritage infrastructure all that whole that all that listed infrastructure so over time although we're using the the DLT today and digital asset to solve particular problem we're looking to apply that into our old world or Heritage infrastructure to make our clearing and settlement capability across all that those those listed markets transactions more efficient could you tell us a little bit about how it is for traditional users and their

10. 5:01

    experience for unlisted markets and what value does FCX provide to users in the space uh yeah that's that's really easily the traditional user experience is pretty poor because we've been through it ourselves a number of times through three four five Capital raises um it's it's very dispersed it's not centralized lots of counterparts you have a registry you have a corporate obviously in this case ourselves you have an advisor a lawyer

11. 5:33

    um you know obviously um your company secretary and there are pieces of paper flying around everywhere so nothing centralized nothing coordinated all managed essentially via a spreadsheet and no one really in control of that spreadsheet of of what of as being a source of Truth and so when we look at what we're doing with the DLT we're looking to centralize all that function we're looking to streamline it make it much more efficient but importantly put it on

12. 6:06

    distributed Ledger a mutable source of Truth can't be tampered with of course but also then have digital wallets where all the investors and the corporates can come in and see a real live implement temptation of their of their Holdings and the cap table you know I find it really exciting that because it's been clear has gone through this the experience they're able to actually you know work with this problem

13. 6:35

    from a first-handed point of view right it's not like you guys are solving someone else's problem this is something that you guys have been through and have experience in knowing where the pain points are and then being able to take that technology that you have and actually resolve these pain points so you know it's it's it's a very exciting journey and I'm really looking forward to seeing what at the end of this road

14. 7:00

    what you guys can accomplish now speaking from the the technical technological point of view as we mentioned we're using technology to solve the pain point that you guys have seen a lot of manual processes um you know how did the decision to actually use a distributed Ledger come to fruition versus a centralized database yeah look it was pretty straightforward from our perspective we'd spent some time looking at the DLT

15. 7:31

    um through the ASX chess replacement project um and and we looked at it from the optic of well how can we provide a more efficient ecosystem particularly around the clearing and settlement capability so one of our I guess criticisms of listed markets is is that there are just way too many touch points there are way too many service providers touching a ticket and so we looked at it from well

16. 8:01

    if we're using distributed Ledger technology we're tokenizing Securities we're bringing cash onto Ledger as well and and hopefully we get to talk about that a bit later then as soon as you've got those two on Ledger you can start to automate and do some really some really clever things like like Atomic real-time settlement and if you look at our DNA where a clearing and settlement business by by DNA we're always looking for

17. 8:32

    efficiencies in that space so you know we we execute clear transact I don't know a 700 billion dollars worth of um worth of transactions on a yearly basis we have 180 staff across three states and we wanted to build a new capability that was scalable and wasn't as I guess intensive from a people perspective I see yeah no that that completely makes sense and I heard you mention the word um tokenize or tokenize the the assets

18. 9:05

    right this is a word that's being uh used a lot in this space um and I actually just want to dig in a little bit deeper on this but you know how does tokenizing assets provide value for your stakeholders um yeah could you maybe shed some light on this aspect yeah look it's it's an efficiency perspective from our from from from you know first and foremost but it also goes to direct digital ownership so one of the things that we

19. 9:37

    didn't touch on here is that our business Our Heritage business supports what we call Direct ownership via quite a unique structure here in Australia called the hin and that's name on register and that's different to the rest of the world which runs an Omnibus or a beneficial ownership only so here in Australia when you buy shares through your stock broker or advisor you get registered with a hin which then puts

20. 10:09

    your name on to register and that's different like I said rest of the world your stock broker would buy your shares and they hold them in a beneficial capability and a custodial capability so here in Australia we are very strong proponents of individuals owning or having their name on register rather than putting an intermediary between themselves and their assets like a custodian and so here is to my mind a

21. 10:43

    very early form of tokenization it's digital it's here in Australia and so what we wanted to do was it expand that universe and provide that digital direct ownership via tokenization and so if you think about what we're doing we're actually building a a wealth platform or wealth infrastructure based on Direct ownership via hin and tokenization of Securities where they sit where everything sits in an individual's

22. 11:16

    digital wallet rather than being held by a custodian that that actually completely speaks to the the real life use cases of tokenization right those are fundamental properties of tokenization but when put into a business perspective such as direct ownership and you had mentioned the atomic settlements the these fundamental properties are actually providing value to the end customers these individuals and I guess you guys

23. 11:47

    have actually found you know a very practical way in terms of putting tokenization in context of the space that you guys are working in and I think that is a Real Testament to the whole process of tokenizing assets and creating digital assets and so that's that's great to hear um you know I'm curious when we mentioned custodians Brokers these are intermediaries in the space I presume

24. 12:16

    that these intermediaries will still play a role in the space in the future can you talk about how or if they need to make any big technological changes on their end to participate in this network that you guys are building yeah again that's a good question and we're not quite sure it's an interesting one at the moment we're running a private um implementation of of The Ledger um we do hope to over time you know look to open that up particularly working

25. 12:48

    with digital asset and the Canton capability but for for the moment the intermediaries the the Brokers we're hoping we'll use FCX or use this private Market capability as a more efficient way for them to raise capital for private companies so really what we've done here here is create the shell create the registry create the tools the ecosystem for a more efficient Marketplace and then we're hoping that you know in addition that we don't want to be the advisor we don't want to be

26. 13:31

    the corporate advisor we don't see there's our role we obviously see our role as being you know the platform and the market eventually but we're hoping then that the Brokers will come and use this capability and promote this capability then to corporates and high net worth because it is a high net worth or a 708 platform here in Australia for them to use over time of course there may well be opportunities for partners to take notes that want to share capabilities

27. 14:05

    with us but at the moment like I said it is a a private implementation and that's very great to hear you know you you mentioned that this is a process right it's it's a it's a slow it's a slow technological process nonetheless but at the end of it it's to hopefully involve everybody in each of these steps to participate in a tokenized ecosystem now with regards to the the whole process and this technological change

28. 14:38

    how did you guys eventually um end up or deciding on using demo for the underlying tokenization technology Simple Choice for us guys and and and actually we think it's one of the big advantages in in terms of of why we've been able to to get on so quickly and develop and and get this this platform to where it is today it was a very simple decision for us we were going to have to um develop into the new chess environment obviously developed um on demo

29. 15:16

    um by digital asset for for the ASX we were going to over time have to um obviously uh start to have our own development resources to support that um and so we really just did a quick stop take of the capability we came to the conclusion very quickly in terms of smart contract capability and financial markets digital asset demo were really at the Forefront of markets um and so you know once we had I guess some confidence around that it would

30. 15:54

    have been full Hardy from our perspective to really sort of split assets so to speak and go and develop or do something um you know in a different application or a different um a different language so um you know it might sound simplistic but you know most decisions are or should be pretty simple to make right and you know in in hindsight explaining things now everything seems more simplistic than it actually is the

31. 16:25

    entire process up until arriving to this point today always in hindsight seems quite clear right and we're painting a Rosy picture through all of this tokenization seems to be the the definite answer today could you share with us some of the challenge that challenges that you faced when building this platform and when arriving at this conclusion yeah look we're not concluded yet and I'm sure there'll be challenges but you know to start with

32. 16:57

    um it's been a remarkably um you know troubles free process to date um we've got to say um and um and we've managed to get there very quickly so I think that's because of this Vision we had in terms of application we knew exactly the problem that we needed to solve um and so we knew how to apply the technology to solve that problem and really if you think about what we've done we've used we've used a distributed Ledger capability to do you know one

33. 17:34

    very simple thing and that is tokenized security tokenized some cash on Ledger we can then start to put some smart contract capability around that for some automated functions and move to Atomic or or same day or instant settlement capability where it gets complicated is are some of the functions that you wrap around that but we've made that incredibly simple or easy from our perspective by using much of our existing infrastructure we're a very

34. 18:08

    mature business we run you know a dozen or so micro servers Java or AWS and so what we do is or what that does is support our listed transactional capability and what we've done then is apply that or wrap that around this this Ledger capability and so from our perspective the most the probably the more complicated part was how we actually did that what technology to apply in the most efficient way but at its core keeping that very simple philosophy

35. 18:48

    of what The Ledger is best for and in our view is actually keeping it very simple and that those transfer of assets I understand that we'll be seeing some new features very soon and that the FCX platform is launching in stages for example the wallet and the capital raising tool I was wondering if you could show us a quick demo on the platform absolutely we'd be delighted um and uh over over to the demo the FCX wallet is a unique secure and

36. 19:22

    efficient way for investors to maintain and transact on various assets from a centralized and secure location an investor can set up a wallet for one or multiple investment entities which could be a personal wallet or a corporate entity holding assets for an underlying beneficial holder like a self-managed super fund or a Family Trust the process to set up a wallet takes minutes and investor simply completes the wallet application on platform providing information relating to the

37. 19:53

    investment entity such as name address and details of any authorized persons the wallet setup has an integrated know your customer verification this ensures that any assets held within the wallet are securely controlled by their rightful owner once the wallet has been set up and the verification has been completed assets can be transferred into the wallet once assets are held within a wallet the

38. 20:19

    investor can manage those assets and participate in future events on platform such as a capital raising or a liquidity event investors can easily manage cash via their wallet on the FCX platform investors simply deposit cash from their regular banking institution there is no need for an investor to set up a new bank account once an investor has deposited their funds the cash is held within a FCX trust account and a cash representation

39. 20:52

    is created on The Ledger via a cash token by tokenizing cash investors can securely and efficiently commit their funds to various opportunities available on the FCX platform such as participating in a capital raising or purchasing shares via the FCX liquidity venue investors are easily able to withdraw available funds in most circumstances instantaneously afcx allows companies and their advisors

40. 21:24

    to easily manage the capital raising process on the platform from setting up the key offer information and documentation all the way through to settlement FCX ensures the capital raising process is controlled by the company and provides the functionality to control investor access and permissions track the status of documentation execution and payments all while maintaining full transparency over the entire process equally investors can easily participate

41. 21:54

    in a capital raising on the platform investors will have permissioned access to key information and documentation Bid And subscribe execute documents via DocuSign pay for their investment plus track and manage the entire process investors also have the assurance that once complete title to the assets will be instantaneously deposited directly into their wallet at settlement any documentation relevant to the raise will be securely stored and accessible during

42. 22:27

    and post the capital raise well thank you David for your time thank you so much for providing your Insight and everything that you've mentioned on the FCX platform it's been a very informative discussion and for anyone that wants to learn more about FCX you can go to their website thank you everybody Thanks Max and thanks digital asset for having us along today it's always great to talk about thin clear

43. 22:52

    and today in particular FCX foreign