The ASX Will Go Head With Blockchain Technology

The ASX Will Go Head With Blockchain Technology

Australia's equity market the ASX has made a decision to replace its CHESS system to record changes in shareholding with distributed ledger technology found in blockchain.

This followed the ASX enlisting Digital Asset at the start of previous year to help it develop blockchain solutions for the equity market.

Benefits of the new system include reducing complexity for customers by having a distributed ledger that represents a single source of truth, and lowering access barriers to non-affiliated market operators and clearing and settlement facilities.

The ASX has spent the past two years building an "industrial strength" blockchain-based solution to determine whether the technology can work at the scale of the local equity market.

The ASX Ltd [ASX:ASX] was in need of replacing their CHESS system, the system that records holdings, executes trades and settles them.

ASX and its technology partner, Digital Asset, have spent the past two years extensively testing the functionality, capacity, security and resilience capabilities in order to meet the needs of the financial marketplace on top of achieving the highest regulatory and operational standards.

The exchange, which has been looking to replace its existing system for more than two years, said it aimed to disclose the proposed timing of the change and the functions the new technology will initially have by the end of March. Although it continues to be "robust and reliable", the ASX said, the exchange is taking the opportunity to replace it with "a next generation post-trade platform using contemporary technology".

Today the company said using distributed ledger technology for CHESS would make it easier for customers to develop new services and lower their costs.

"After so much hype surrounding distributed ledger technology, today's announcement delivers the first meaningful proof that the technology can live up to its potential", said Digital Asset's chief executive Blythe Masters, a former JP Morgan banker, in a statement. We've given over 80 DLT system demonstrations to more than 500 attendees, and conducted over 60 CHESS replacement workshops for more than 100 organisations from the global financial services industry.

On Thursday, the ASX said it will now work with stakeholders on finalising the scope of Day 1 functionality for the new system.

Coinciding with today's decision, ASX will exercise its pro-rata right to participate in DA's recent Series B fundraising and subscribe for US$3.5 million convertible notes. JPMorgan in October rolled out its latest pilot program to use blockchain to enable faster, more secure transfers of cross-border payments between it, Royal Bank of Canada and Australia & New Zealand Banking Group Ltd. "This development puts Australia at the forefront of digital innovation in financial markets and will strengthen our financial system through greater efficiencies. Developing this sector will drive a stronger economy and a more competitive market for consumers", Morrison said.

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