Australian Securities Exchanges to Integrate Blockchain Technology by 2020

A lot of platforms across different industry sectors are now considering implementing the blockchain over the course of next few years. The latest to join the club is the Australian Securities Exchange (ASK) who is planning for a complete technology revamp by replacing its existing Clearing House Electronic Subregister System (CHESS) system with blockchain technology by as early as Q4 2020.

According to the latest consultation paper released by ASX, the technological shift will take place over the course of next two years with the addition of several new features. The paper clearly notes that ASX will be using the Distributed Ledger Technology (DLT) in order to manage Australia’s financial market with new features supporting the cost reduction.

Digital Asset, a New York-based fintech company is said to be the main technical partner for this project and will be building all the DLT products. Under the new blockchain-based system participants at both end of a bilateral transaction can pre-match the transaction without committing it for settlement.

Australian Securities Exchange ASX has been using CHESS as its core system for asset registration, clearing settlement, and post-trade service, for over 25 years. The exchange 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.”

The idea to integrate a blockchain system to ASX was first proposed back in 2015 by the then managing director - Elmer Funke Kupper. He said that DLT or blockchain was “once in a 20-year opportunity”.

During the last year-end in December 2017, the newly appointed managing director and CEO Dominic Stevens confined the plan and the roadmap of blockchain integration.

The recently released consultation paper notes: “Migration testing will begin in Q2 2020 and will culminate with migration dress rehearsal weekends in preparation for go-live. 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 also asking the stakeholders and users for their feedback for executing this technological shift especially on parameters like timing, testing and transition arrangements for the new system. If everything goes as per the plan, ASX will be the first major global stock exchange to implement the blockchain technology.