ASX to switch to DLT-based system for trade settlement

ASX to switch to DLT-based system for trade settlement”

The Australian Securities Exchange (ASX) will replace its current clearing system with blockchain technology.

ASX bought a minority stake in United States blockchain developer Digital Asset through a A$14.9 million (US$11.27 million) investment in January previous year, to design a new post-trade solution for the Australian equity market.

In addition, ASX also announced that it will exercise its pro-rata right to participate in Digital Asset's recent Series B fundraising and subscribe for US$3.5 million convertible notes.

Sign up here for free access to 7 articles per month + twice daily business email alerts. ASX said it is now taking the opportunity to replace CHESS with a next generation post-trade platform using contemporary technology that makes an important statement of embracing change to the rest of the world.

The ASX invested $14.9 million into USA distributed ledger company Digital Asset in January 2016, and increased its stake in June 2016.

"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", ASX MD and CEO Dominic Stevens said.

The market operator's decision is a win for the young technology company led by Blythe Masters, a former senior JPMorgan banker.

DLT brings tremendous value and will provide a standardised structure to synchronise the different systems or databases participants use, as well as instantly eliminate reconciliation issues, he said, adding blockchain technology is not as a bigger risk others may perceive it as.

The new CHESS system's initial functionality and the planned transition timing will be released for market feedback at the end of March next year.

ASX has revealed that it will now work with stakeholders on finalising the scope of Day 1 functionality for the new system, drawing on its extensive consultation that will continue in 2018.

The bank's head of blockchain has revealed the Commonwealth Bank is now implementing with a large world issuer in what will be a "world-first" issuance of a bond on the blockchain that it hopes to bring to market in 2018.

It is touted that blockchain technology is a more efficient and less expensive way to track trades.

Blockchain is massively hyped and banks have conducted myriad tests of the ledger technology, with few live deployments.

This comprehensive guide covers everything you need to know about the innovative blockchain technology that powers Bitcoin, Litecoin, and other cryptocurrencies.

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