Can blockchain transform digital securities management for stock exchanges?

The Athens Stock Exchange (ATHEX) is positioning itself to become a trailblazer in the financial world by planning to integrate blockchain technology with an Electronic Book Building (EBB) system.

ATHEX announced in early March that it has partnered with the Sui blockchain ecosystem to provide digital certificates for its users for security, efficiency and transparency.

The primary issuance process traditionally involves separate approvals for securities allocation and approval. However, integrating the blockchain makes this easier by combining it into a single and streamlined verification.

This can translate to faster and more efficient transactions for everyone involved – the exchange, its members, investors and, most importantly, issuers raising capital.

Cointelegraph spoke with its representative to better understand the partnership with ATHEX and blockchain.

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Improved security and transparency

One of the primary motivations for integrating blockchain into a highly sensitive network — like a stock exchange where billions of dollars are traded every day — is the massive security boost.

Digital certificates associated with blockchain transactions, along with being on a public immutable ledger, provide a superior layer of security, helping to eliminate the risk of fraud, a constant challenge in traditional finance (TradFi).

This transparency extends to regulatory oversight, allowing regulators to more easily monitor suspicious behavior in business activities. Sui's spokesperson commented:

“Primary issuance processes have been victims of bad actors and unclear classification malpractices for decades.”

“Also, having an immutable public ledger that reflects business transactions will ease regulators' ability to monitor business activities for suspicious transactions or improper allocations,” he said.

He pointed out that this particular use case is suitable for reducing the risk of primary supply and increasing overall capital raising, pricing and transparent allocation.

Construction of an electronic book on the chain

The new tool being developed by ATHEX, called EBB, aims to be the fundraising tool of the future, allowing both early-stage and mature companies to list transferable securities.

According to a Sui representative, Greece's stock exchange EBB has placed it “at the forefront of innovation…compared to exchanges around the world.”

“ATHEX has successfully used EBB to relaunch their corporate bond market with strong demand from retail and significant subscription.”

The goal of using blockchain technology is to increase innovation while providing the safety, security and transparency that individuals and regulators need.

He also advised that when implementing blockchain in a project at the scale of a typical financial market, it is important to prioritize the speed, security and payments of a given blockchain network.

Other exchanges have tried to use blockchain technology in their other business strategies, but ATHEX's committed partnership with Sui puts it ahead of the pack in taking action with Web3 tools.

Web3 TradFi trends

While ATHEX may be one of the pioneering stock exchanges to implement blockchain through the EBB tool, other global stock exchanges are also entering the Web3 space.

Significantly, the London Stock Exchange (LSE) announced on March 11 that it intends to consider applications for Bitcoin and Ether cryptocurrency exchange-traded notes (ETNs) in accordance with the requirements set out in the Crypto ETN Entry Information Document in the second quarter of 2024.

On March 25, he revealed that applications for crypto ETNs could be submitted as early as April 8, with successful funds listed next month with approval from the country's Financial Conduct Authority (FCA).

While not blockchain integration, the exchange's transparency and Web3-friendly approach could mark a big trend in TradFi.

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