SGX Uses Amazon Managed Blockchain to Build Innovative Payment Solution

Singapore Exchange Limited (SGX) is an investment holding company that provides securities and derivatives trading services throughout Asia. SGX operates equity, fixed income, and derivatives markets in accordance with stringent and complex regulatory standards. As a global multi-asset exchange, the organization pursues technological innovation to power the transformation of critical financial-market infrastructures.

Like other exchanges, SGX has evolved into a highly organized and regulated electronic marketplace that facilitates transactions for financial products across all asset classes—from equities to fixed income to currency and commodity derivatives. However, SGX was still reliant on heavy data-center infrastructure and complex transaction workflows. Batch processing and manual reconciliation still plagued most types of financial transactions, and compounded by localized infrastructure, hampered the growth and innovation SGX required to keep pace with the rapidly changing needs of investors. “Unlike many ecommerce ecosystems, financial institutions today still operate very heavy data-center footprints,” says Peter Shen, head of technology strategy and innovation at SGX. “Over the years, the need for highly secure and mission-critical environments has led to overbuilt networks and infrastructures that cater to peak demand but operate at low efficiency.”

To address its challenges, SGX has worked closely with Amazon Web Services (AWS) to transition infrastructure to the cloud, enabling greater efficiency, scalability, and reliability. “At SGX, we have decommissioned our mainframes and migrated away from legacy architecture onto modularized platforms supporting open APIs,” says Shen. “The next step for us is to leverage cloud technologies to optimize and scale our infrastructure and, more importantly, to be able to distribute our services and market data more effectively to our customers.”

Recently, SGX began exploring the use of blockchain to codify rights and obligations in a consistent and coherent way to create a truly digital end-to-end marketplace. “Blockchain is a frequently misunderstood technology, yet it is also one of the most promising areas of innovation today for specific use cases that involve transactions at scale,” says Shen. “Smart contracts and distributed ledgers have great potential to fundamentally transform capital markets, making financial transactions and processes more transparent, resilient, and less costly.”

However, SGX discovered that operating a blockchain infrastructure in a highly regulated, mission-critical environment was a major challenge. “When we first started working on blockchain and got deep into Hyperledger Fabric and smart contracts, we deployed the nodes onto physical servers, connecting them with Ethernet cables to form the network,” says Shen. “However, we quickly realized that running this type of architecture inherited all the problems of our existing world and would be very difficult to operate and scale. For an exchange business, the overheads of operating and maintaining the blockchain network consumes valuable resources but adds very little value to our customers.”

SGX chose to solve its scalability and management challenges by expanding its AWS footprint and moving its existing investments in Hyperledger Fabric to Amazon Managed Blockchain, a managed service that helps SGX easily create and manage scalable blockchain networks. Using Amazon Managed Blockchain and working closely with the AWS Professional Services team, SGX set up blockchain in a few days and has been able to conduct significant experiments with the technology. “Leveraging Amazon Managed Blockchain with Hyperledger Fabric, we were able to quickly build a platform and work with our partners to build a better interbank payments platform,” Shen notes.

Relying on Amazon Managed Blockchain, SGX no longer needs to manage complex API integrations across disparate banking systems, increasing the efficiency of data and transaction transfers. “Amazon Managed Blockchain offers businesses the opportunity to eliminate the heavy lifting typically required in setting up the infrastructure stack. This allows SGX to focus on adding business value and not worry about managing or scaling the underlying platform,” Shen says. “In just a few clicks, we can have a functioning blockchain network up and running and easily invite our partners to join the network. This significantly changes our deployment model and takes blockchain one step closer to mainstream adoption.”

Using Amazon Managed Blockchain, SGX no longer needs to rely on an intermediary to process and send information back and forth, which enables transaction transparency across a shared ledger. As a result, the company expects to reduce settlement time for trades by up to 60 percent.

Because Amazon Managed Blockchain simplifies the creation and operation of blockchain networks, it is easier for SGX to experiment and adopt critical systems. Ultimately, the organization anticipates blockchain will go beyond enabling more efficient transaction models to creating a new digital asset class that can change the way funds are raised and distributed, unlocking liquidity and facilitating borderless transactions. “We believe the service is a significant step in the right direction for mainstream blockchain adoption,” says Shen. “SGX is committed to harnessing emerging technologies—working together with key technology companies like AWS, as well as our customers—to bring value and growth to the ecosystem.”

To learn more, visit thinkwithwp.com/blockchain.