The ASX is going ahead with a blockchain-based core system

Mae Love
December 7, 2017

The Australian Securities Exchange (ASX), will move the settlement and clearing of the $2 trillion Australian cash equities market onto blockchain-inspired technology being developed by a NY start-up.

The ASX has spent the past two years building an "industrial strength" blockchain-based solution to determine whether the technology can work at the scale of the local equity market. "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".

"The testing confirms ASX's confidence in the functional, capacity, security and resilience capabilities of DA's [Digital Asset's] application of DLT [distributed ledger technology] to meet the needs of Australia's financial marketplace and maintain the highest regulatory and operational standards", the ASX said today.

Drawing on its extensive consultation, ASX said that it will continue to work with stakeholders on finalising the scope of Day 1 functionality for the new system.

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Chess was scheduled to be upgraded even before the exchange had considered blockchain, said Dominic Stevens, ASX's chief executive officer. Day 1 functionality and the proposed timing for transition are expected to be released for market feedback at the end of March 2018.

With the emergence of blockchain potentially requiring the government to find other means of tracing the income and assets of organisations and individuals, a House of Representatives committee has toyed with the idea of the ATO heading down the distributed ledger path. It operates as a decentralised, public ledger of every transaction made, with transactions verified and shared by a global network of computers. But they will be working with Digital Asset Holdings, which is a blockchain startup by Blythe Masters, a former JP Morgan Chase banker, on the matter.

"The system will be designed without access barriers to non-affiliated market operators and clearing and settlement facilities", the ASX said. Cliff Richards, head of equity post-trade at ASX said moving to blockchain could also be beneficial for Australia's securities regulator. But ASX is now replacing CHESS with a next generation post-trade platform using contemporary technology. "This development puts Australia at the forefront of digital innovation in financial markets and will strengthen our financial system through greater efficiencies".

The world will "look on carefully" as the ASX becomes the first major stock exchange to implement distributed ledger technology (DLT) across its trading platform, says deputy chief executive Peter Hiom.

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