By
Godfrey Benjamin
April 12th, 2024
ASX Limited, Australia’s leading market operator, has announced that it is planning to release blockchain technology for settlements in 2021.
According to the announcement made by Australia’s leading stock exchange operator, ASX Ltd., it is now ready to replace the Clearing House Electronic Subregister System (CHESS) that it has been using over the years with a new system powered by a digitized, decentralized and distributed ledger technology.
Exchange’s Upgrade
While blockchain will be replaced with a new system in 2021 in the framework of the company’s upgrade, ASX Ltd.’s deputy chief executive officer, Peter Hiom, refuses to admit that this new initiative is a radically different approach.
Giving his comments about the new system, he said:
“We’re not entering the fourth dimension here. It’s a database architecture that lets you do a bunch of things much more efficiently than you can at the moment.”
Nevertheless, the above mentioned CHESS system is still being actively used. Its aim is to make the procedure of transferring the rights of legal ownership of a security from a seller to a buyer easier. Moreover, it is applied for processing monetary transactions that presuppose participation of two parties.
Though CHESS is based on an electronic book register technology, it is obvious that it is aging and sometimes it lacks some capacities to carry out its functions in a way that could satisfy the needs and demands of the today’s financial industry. It is believed that blockchain will make all the processes more efficient and effective.
Benefits of a New System
Hiam explained what benefits the new system would brought. “There is a blockchain that is synchronizing my data store with yours, but the data store itself is a database that exists today,” he said.
According to him, the innovative nature of the system means that the decentralized ledger will allow clients to see ASX’s data. “It’s actually taken an awful lot of risk and cost out of your back office because it is never the case that what you’ve got doesn’t match what I’ve got,” he added.
ASX and Blockchain
Though now it seems like ASX is going to make blockchain its core technology, it is not true. The company views it just as a logical improvement but doesn’t want to go mad about it. Speaking about the technology itself, Peter Hiom noted:
“It’s a very clever architecture, but it is just a database architecture. It doesn’t sound very sexy when you say it that way, but that’s kind of what it is.”
While ASX doesn’t want to be fully associated with this technology, there is a wide range of other institutions and organizations that strongly believe that such initiatives are able to revolutionize and significantly facilitate the process of stock issuance and trading.
For example, just recently TMX Group Limited, a stock exchange operator based in Canada, has applied distributed ledger technology to clearing and settling securities on an integrated platform. Such a move is just one part of a bigger project called the Jasper Research Initiative.