The Australian Securities Exchange (ASX), the leading stock exchange in the country, replaces CHESS system which has been in use since the 1990s with the post-trade platform based on distributed ledger technology (DLT). This platform is created by Digital Asset (DA) that has already attracted such investors as Goldman Sachs, IBM, J.P.Morgan, Accenture, etc.
Blythe Masters, Digital Asset CEO, summed up the partnership: “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. Together, DA and our client ASX have shown that the technology not only works, but can meet the requirements of mission critical financial infrastructure”.
CHESS stands for Clearing House Electronic Subregister System. ASX has always been an innovative company and CHESS used to be one of the top systems of the kind when it was introduced. And even though time has passed it is still a solid and reliable system. However, ASX decided not to miss its chance to provide its customers with the top service based on the most popular technology of the days.
This decision was not made abruptly – ASX has already demonstrated its interest in the blockchain technology. ASX and DA have been working together for more than 2 years in order to make sure that the new DLT-based system can provide the required level of sustainability, capacity and security. ASX did its best to maintain the high standards of Australian financial marketplaces. The testing by DA and ASX itself was not the only step of replacing CHESS. It also included third part reviews and consultations with stakeholders.
Dominic Stevens, ASX Managing Director and CEO, describes the replacement in the following way: “ASX has been carefully examining distributed ledger technology for almost two-and-a-half years, including the last two years with Digital Asset, in order to understand its potential application. Having completed this work, 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”.
The new system is using the DLT technology which is mostly associated with blockchain. It means that each participant of the network is known and has to follow some obligations. According to the DA approach to the DLA technologies, authorized market participants do not have to share the private information like price or names of the traders. Instead of it the new system provides them with the confirmation of private transaction.
The DLT-based system offers the ASX’s customers the flexibility in using post-trade services. It is also opened for the non-affiliated market operatorsl. The transaction period is still to be discussed, but it is already known that customers would be able to choose between a familiar way of connecting with the system and the direct interaction with DLT.
Peter Hiom, ASX Deputy CEO, proves that the company has worked a lot on the project: “ASX has consulted extensively on the needs and priorities for replacing CHESS, including with customers, share registries, software vendors, other exchanges and industry associations. I am very grateful for their input and support. 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. ASX has also formed a strong partnership with Digital Asset over the past two years, and we’re confident we have chosen the right partner. Together, we look forward to continuing to work with the industry as we finalise the requirements and the roadmap for implementation of the new system”.
ASX joins the wide range of companies that bet on the blockchain. Its partnership with DA may give a boost to the Australian stock market. The usage of the distributed ledger technology for transactions seems to be a promising innovation. And that may benefit not only ASX, but the whole Australia’s economy.