HK crypto exchange aims to power ahead with LSE tech support

August 23, 2019 11:34
AAX digital asset exchange will leverage LSE Group technology to deliver trusted and secure trading services, says Peter Lin, CEO of Atom Group. Photos: AAX, Bloomberg

Despite the worldwide attention on crypto-related businesses following a meteoric surge in digital currency prices in the recent past, the sector players, such as the trading firms and technology developers, are still struggling to build trust among the public in the nascent technology.

Hong Kong-based digital asset exchange AAX, owned by fintech startup Atom Group, is determined to bring trust and integrity into the market, with its trading technology licensed from the London Stock Exchange Group, company officials say.

“Our core value is trust, which is, we think, the pain point of the industry right now,” Peter Lin, chief executive of Atom Group, told EJ Insight.

The AAX exchange, to be launched in the fourth quarter this year, will be powered LSE’s Millennium Exchange matching system, which is already used to match trades on traditional stock exchanges in places such as Hong Kong and Singapore, he said.

The London Stock Exchange Group operates a broad range of international equity, bond and derivatives markets, including the London Stock Exchange (LSE), Italy’s only stock exchange Borsa Italiana, and MTS - Europe's leading fixed income market, among other entities.

“Different from other ‘consumer-level’ exchanges, this matching engine can provide both high performance and high capacity, and low latency, ensuring trades are executed quickly and reliably,” said Lin.

According to Lin, AAX will be able to deliver millions of order matching per second, at a latency in less than 1 millisecond (a thousandth of a second), which he believes will be its key advantage to lure institutional investors, at a time when there are multiple delays in transactions and even platform outages on existing crypto exchanges, in particular during market volatility and stress periods.

Apart from the matching engine, the rest of the technology system deployed in the platform is built by AAX, Lin said.

“Trust (from customers and the public) is the most valuable asset for this industry,” said Lin. " And it cannot be won overnight, we have to invest in it and act on it consistently.”

Since founding in 2018, the team has spent time and effort on building the fundamental technology and infrastructure of the exchange, rather than rushing to launch the platform to seize the bullish market momentum at that time, he said.

With the emergence of digital asset exchanges around the world, the market has seen traditional exchanges partnering with crypto players to enter the booming space, while on the other hand, crypto exchanges are also trying to leverage or purchase the technology from established exchanges.

The Australian Securities Exchange (ASX) is reportedly looking to rebuild its equity post-trade clearing and settlement system with the support of US-based blockchain tech firm Digital Asset.

In order to integrate and deploy LSE’s Millennium Exchange matching system for the AAX digital asset trading platform, Lin said the two companies have worked closely for more than twelve months.

LSE is a technology partner with Atom. ''It does not only offer the technology, but it also benefits from the commercial success of AAX,” Lin said, but pointed out that the London bourse doesn’t hold any equity in AAX right now.

While more than 1,000 cryptocurrency exchanges have popped up around the world in the past few years, the digital asset trading market is still in the early stage in Asia, according to Lin.

“Right now, the aggregated cryptocurrency market cap is only about US$300 billion, which is very tiny compared with the existing venture capital market.”

He believes investors in the region, in particular, the institutions, will acknowledge and invest in this new asset class.

“This is the reason that we are not building our platform for the market demand today. We are making it ready to satisfy the market demand of the future,” Lin said.

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EJ Insight writer