The CHESS clearing and settlement system that was being used by the Australian Securities Exchange (ASX) is edging closer to being replaced by a distributed ledger-based option.
Paper Details CHESS Replacement
The ASX released an 87-page consultation paper which talks about the timeline of the switch and a detailed description of the supported and not-supported functions. The exchange firm primarily aims at launching the product in 2020 or at most, the first quarter of 2021. Prior to which, the firm is expecting feedback on its plans.
“Depending on the extent of consultation feedback received, ASX expects to provide a final functional scope and implementation roadmap in late July 2018,” the firm explained in the opening of the report.
ASX Interested in Blockchain’s Prowess Since 2015
Back in 2015, ASX expressed its interest in becoming one of the first in the stock exchange world to adopt distributed ledger technology (DLT) and has been effectively exploring the use of DLT since. It also aims at using the system for activities including post-trade settlement, by collaborating with Digital Asset, Blythe Masters’ blockchain startup.
The involvement of Digital Asset in the platform is commendable, as it built the system that allows the mutualization of financial market data and processes across multiple market participants. Due to the blockchain, the system maintains scalability and confidentiality – integral features for an exchange market platform.
For ASX, to be seizing the opportunity and adopting DLT is quite a feat. The sentiment is echoed by David Puth, CEO of CLS Group, who believes that the move by the ASX is a game-changer and will establish standards for the blockchain enterprise.
Launching a system based on DLT will clear the air around the topic and make the functioning of the technology clearer for others in the industry. In a satirical remark, Peter Hiomx, CEO of ASX, said, “You’re not entering the fourth dimension.”
ASX’s Two Year DLT Testing Phase
On December 13, 2017, BTCManageron ASX’s adoption of blockchain technology to facilitate its equity trading platform.
Previously, the exchange tested DLT for two years – including building proofs of concept, allowing potential users to test the platform, and beta testing the finished product in a live-trading environment.
The exchange made history as the first major stock-exchange to initiate implementation of a blockchain-based trade matching system.
In a press statement, Dominic Stevens, managing director and CEO of ASX, said:
“We believe that using DLT to replace CHESS will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets. While we have a lot more work still to do, today’s announcement is a major milestone on that journey.”