Can you see the irony here?
A competing stock exchange with its stock listed on its competitor’s stock exchange.
That’s the situation with the National Stock Exchange of Australia (NSX). The NSX is an alternative stock exchange to the Australian Securities Exchange (ASX). A competitor.
But it’s listed on the ASX. Funny that.
It’d be a bit like having a Whopper available at McDonald’s. I think…
The point being is that the NXS is trying to get companies to switch from the ASX to the NSX. They even have a ‘Fast Track’ process. As they put it:
‘NSX has created the NSX Fast Track service for companies wishing to move their Australian listing from the ASX to the NSX. As the name suggests it’s designed to make the switch as easy, simple, inexpensive and fast as possible.’
They claim to have, ‘shorter, simpler rules and processes’. This also, as they say, leads to:
‘Lower costs, less complexity and more management time spent actually running your business.’
For point of comparison, the ASX at any given time has around 2,100 listed companies. According to data from their site, the NSX has 67 companies.
Also on Wednesday, the NSX processed five trades across its exchange. The total trade value of those trades was $125,732.
Meanwhile on the ASX, in just one day (Thursday) CSL Ltd [ASX:CSL] alone topped $255.8 million. In just one stock. And as for the number of trades…over 1.8 million.
That’s also why the ASX carries a market cap of $15.7 billion. And the NSX carries a market cap of $40.8 million.
Now, this isn’t really a fair fight.
The NSX was technically founded in 1937 as the Newcastle Stock Exchange. It was somewhat of the regional exchange. And it disappeared for a while only to then be reinstated in the 2000s.
But only really in the last couple of years has it got in new management and realigned to take on the ASX head first.
The ASX’s origins goes as far back as 1871. That’s when the Sydney Stock Exchange started. Eventually each of the states would launch their own exchanges. But it wasn’t until 1987 under legislation from the government that all the exchanges would come together for the ASX.
Hobart, Adelaide, Melbourne, Brisbane, Perth, and Sydney would all amalgamate to become the ASX.
The ASX in reality has had a decent head start. And thanks to the government, has become the behemoth it is today.
The two competing is really a David and Goliath story.
That means in order for the NSX to have a chance, they need to be smart. They need to be innovative. They need to think and act faster than the ASX to lift their competitive advantage.
But how on Earth do you do that going up against a $15 billion giant?
Well you look around for someone who’s got beef with the ASX…
And then you throw in possibly the biggest technology revolution to ever hit the world of finance.
Setting up a ‘spite store’
I’m a fan of the TV show, Curb Your Enthusiasm. If you’ve not seen it, highly recommend. Anyway, Larry David plays himself as the lead character. And in one episode in the latest series he has a falling out with his local coffee store, Mocha Joe’s.
Larry is furious with Mocha Joe’s because of the cold coffee and the fact they didn’t treat him or his friend right.
To get back at Mocha Joe’s, Larry decides to set up a ‘spite store’. In the shop next door, which happens to be for lease, Larry decides to open Latte Larry’s. Exact same store but massively undercutting Mocha Joe’s, hopefully to put him out of business.
Well this story kind of rings true as to what’s going on between the ASX and one of their listings, iSignthis Ltd [ASX:ISX].
iSignthis fell afoul of the ASX late last year. So much so that the ASX decided to suspend ISX stock from trading on 2 October 2019. ISX stock has been suspended ever since.
iSignthis was pretty angry about this. And it’s played out in the subsequent months in the media, announcements, even making its way to the Federal Court.
But still, ISX stock are suspended. And the ASX isn’t budging. Meanwhile ISX shareholders have been stuck in limbo.
But yesterday, ISX played a pretty big hand. They released an announcement about a ‘strategic investment’ in the NSX.
Hmmm. Now it gets interesting.
iSignthis has invested $4.2 million for 12.96% of the NSX. Furthermore ISX and the NSX are entering a joint venture for a new, ‘multicurrency, real-time, same day DvP [delivery versus payment] platform,’ they will call ClearPay.
The NSX is also going to try to raise another $3.8–5.8 million to push things along. And ISX could even snaffle that up a big chunk of that too if they wanted.
What they’re really building here is the foundations of a ‘digital asset exchange’.
This new system will be blockchain-based and reduce settlement most likely to same-day.
Now speaking of blockchain-based stock exchanges and asset trading, I saw this future unfolding years ago.
Not the ISX and NSX specifically, but the fast approaching future of blockchain networks upending the traditional world of finance.
Blockchain tech is one of the key underlying foundations of cryptocurrency, and soon all assets.
It’s sparking what I think will be the biggest wealth creation opportunity we’ve ever seen. And I recently went into detail about how it will all come together with my publisher James Woodburn.
However on the face of it, I think ISX is setting up a ‘spite store’. While they didn’t indicate they would shift their stock to the NSX…it would make sense to reopen liquidity to shareholders and to allow the company to trade again.
Instead of being held to the sword by the ASX, they’d be able to do as they wish (while still meeting regulatory standards of course) on the NSX.
In effect they’ve almost bought themselves a new exchange, giving them options regardless of what the ASX ends up doing with them.
Blockchain is the future of all market trading
However there’s still more to this story. You see the idea of a digital asset exchange built of a non-proprietary blockchain is actually quite exciting.
Sure, it might help speed up and improve the current stock market. But it could finally unlock the door to a whole new world of real-time 24/7 market operation.
And if we continue to progress towards regulated security token offerings in the cryptocurrency world, then who’s to say they don’t look to the NSX for a market?
This could be the start of something far bigger for the NSX and for the future of stock trading not just in Australia, but around the world.
Imagine a market where all company-issued stock is effectively a security token. Offering the same rights and ownership as a traditional ‘common stock’. Except you can trade anytime, anywhere in the world across borders, across currencies. It’s all in real time and it’s all blockchain-based.
That’s the future of stock markets and asset trading. And maybe, just maybe, this is the start of something really big. Of course, the market liked this announcement. The NSX price spiked 133% yesterday on the news.
Not a bad result for a ‘spite store’. But with a market cap of $40 million, you’ve also got to think if this is the future of stock markets, security tokens, and blockchain-based assets…then is $40 million expensive, or cheap?
Editor, Money Morning