By
Godfrey Benjamin
April 12th, 2024
The Australian Securities Exchange (ASX) announced signing a memorandum of understanding (MoU) with Digital Asset (DA) and VMware for the development of its blockchain-based equities clearing.
The Australian Securities Exchange (ASX) decided to expand their working on the project that aims to replace their Clearing House Electronic Subregister System (CHESS) platform with another platform that built on distributed ledger technology (DLT).
The ASX has been working on this substitution project since 2015, partnering with blockchain startup Digital Asset. Yesterday, they announced that they will secure the assistance of VMware, signing a three-party memorandum of understanding (MOU) that will see work be conducted on DLT initiatives in Australia.
According to the MOU, ASX will issue its DLT offering with the support of Digital Asset and VMware, that includes the development of the application to replace CHESS; the support of DAML, the open-source smart contract programming language used to build distributed applications; “and the provision and support of the distributed ledger and associated infrastructure, which delivers ASX’s data privacy, confidentiality, and security requirements at a greater scale.”
From the ASX they said that even though their goal is the replacement of CHESS, this partnership will build up their capacity to support the financial services industry by the infrastructure usage all in order to create new services and innovations beyond clearing and settlement.
Facebook Among the Clients
David Tennenhouse, senior vice president and chief research officer at VMware said:
“Providing a state-of-the-art DLT-based system will create new business opportunities for the industry. We’re working closely with DA and ASX on a combined offering to provide the enterprise-grade foundation for ASX, and we look forward to expanding our relationship.”
VMware started working with blockchain first coming up with a scalable Byzantine Fault Tolerant consensus protocol that became a foundation of their blockchain – their platform. One of the companies that is using technology from VMware is Facebook that needs it for its Libra digital asset. Libra will house a variant of “Hotstuff,” a consensus mechanism VMware developed.
All parties said the MOU will enable them to combine powers in order to deliver and reinforce DLT solutions to users in Australia and New Zealand.
ASX deputy CEO Peter Hiom called this partnership a positive development that will help them support a wider range of DLT solutions developed by the industry.
“It confirms our belief in the potential of DLT as we remain on track to deliver the CHESS replacement system in March-April 2021.”
CHESS has been going in full mode during the last 25 years. Around AU$2 trillion worth of equities was registered and, per day, around AU$5 billion was processed through CHESS. That represents around 300-500 transactions and up to 1,500 messages that are being processed every second.
Around 30-40% of ASX’s major functional has been build for the new system to replace CHESS. The new system is set to go through the industry-wide testing in 2020.
Software is being gradually used inside ASX’s Customer Development Environment, where users and service providers explore the clearing and settlement functionality of the new system.
CHESS is constantly sending messages back and forth to reconcile the industry view of the clearing and settlement data for the Australian equities market. Besides the operator, everyone else operates on data copies so when it comes to change, they need to be transferred across.
ASX general manager of engineering and architecture David Campbell said:
“For us, DLT-based CHESS is the next generation of market infrastructure, moving away from the notion of a central database messaging to distributed database shared with our customers, allowing for real time source of truth to be shared, whilst also preserving privacy and integrity.”
He added this is a shared, replicated ledger:
“We have a copy, our customers have a copy – anyone who takes a node has a copy of the ledger – all synchronized. Each transaction refers to the previous transaction, and is cryptographically signed by a legal approver. In that case, that legal approval relates to trust in the system and a very important element.”