ASX’s chairperson, Rick Holliday-Smith, says the company is “increasingly confident” of the potential for a system based on blockchain-inspired distributed ledger technology (DLT) to replace the Australian Securities Exchange CHESS system.
The Clearing House Electronic Subregister System, which provides equity post-trade services, dates back to 1994. CHESS remains stable and functions effectively, according to the ASX. However, the exchange believes there are potential benefits to rolling out a DLT-based system. Those benefits include reducing complexity for customers by having a distributed ledger that represents a single source of truth.
Last year, ASX built a prototype DLT replacement for CHESS.
A replacement for CHESS would be based on technology developed by US company Digital Asset Holdings. In 2016 ASX picked up a 5 per cent equity interest in the company.
“We are increasingly confident that this technology will help simplify how our marketplace works and should unlock a new era of efficiency and innovation,” Holliday-Smith said in remarks prepared for ASX’s AGM today.
“Our extensive market consultation remains underway, including workshops, demonstrations and business committee meetings, involving customers, regulators, share registries, other exchanges and industry associations,” ASX CEO Dominic Stevens said in remarks prepared for the meeting.
“We’ve given over 60 DLT system demonstrations or CHESS replacement workshops to more than 110 companies and over 500 attendees from the global financial services industry.
“All this ensures that ASX will be the best informed it can be about the specifications needed for new post-trade infrastructure for the equities market.”
DLT can potentially deliver “real efficiency gains for the market,” the CEO said. The ASX is on track for a December announcement about whether it will replace CHESS with a DLT-based system.
“The process has been a fantastic opportunity for ASX to engage with its customers and build a detailed understanding of what the industry wants,” Stevens said.
“This has also included identifying improvements for customers beyond the world of CHESS, which we are also looking to implement.”