The Australian Securities Exchange (ASX) has said it will implement a blockchain-based post-trade system from as early as Q4 2020, replacing the current Clearing House Electronic Subregister System (CHESS) system.
A public consultation paper released by the ASX outlines planned new features, alongside a two-and-a-half year implementation plan. The paper confirmed that The ASX will use a new distributed ledger technology to manage the Australian financial market and will introduce 50 new features that will lead to cost reductions.
The new system will allow settlement participants on both sides of a bilateral transaction to pre-match the transaction earlier in the settlement period without committing the transaction for settlement. New York-based fintech company, Digital Asset is building DLT products, is the main technical partner for the initiative.
For the last 25 years, CHESS has been the core system for clearing, settlement, asset registration, and other post-trade services critical to the orderly functioning of the market. ASX said: “CHESS continues to be stable and to effectively deliver these services. While there is nothing to indicate that CHESS will not continue to provide this service level, ASX is replacing CHESS with distributed ledger technology (DLT) which will provide a broader range of benefits to a wider cross-section of the market.”
In 2015 ASX started reviewing options for replacing CHESS and the managing director of ASX at the time, Elmer Funke Kupper stated that a blockchain-powered platform was a serious candidate to replace CHESS. He said the technology was a “once in a 20-year opportunity” for a technological revamp.
In December 2017, current ASX managing director and CEO Dominic Stevens confirmed a roadmap wherein blockchain technology will replace the existing clearing and settlement system and, in the process, become the world’s first major stock exchange to integrate decentralized blockchain technology.
“Migration testing will begin in Q2 2020 and will culminate with migration dress rehearsal weekends in preparation for go-live,” last week’s consultation paper added. “Successful industry-wide testing and dress rehearsal weekends are required for go-live and will allow a primary and backup go-live weekend to be scheduled, taking industry feedback into consideration.”
ASX is calling for written feedback from users and stakeholders on the timing, testing and transition arrangements for the new system, and on the new business requirements captured in the plan by 22 June 2018.