ASX Switches Clearing and Settlement System to the Blockchain

ASX
ASX Switches Clearing and Settlement System to the Blockchain
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Building on its initial Clearing House Electronic Subregister System (CHESS), the Australian Securities Exchange (ASX) has released the first blockchain based Customer Development Environment (CDE) for testing.  The company revealed this development through a press release published earlier today. The CDE will be the first mainstream exchange to adopt distributed ledger technology (DLT) for clearing and settlement.

ASX, which is Australia’s primary securities exchange, stated that this release is the first amongst seven other software codes that will be released at every eight-week interval. These seven codes will add up to full functionality in the CDE by mid-2020.

Flipping the switch

Since its launch back in the 90s, the CHESS has formed a vital aspect of the ASX’s operation infrastructure. Over the years, it has been tasked with handling operations such as asset registration, settlement, and clearing. However, the exchange has now seen the potential of blockchain-based operation, and they are commencing the transition process in earnest.
In its release, the exchange claimed that it had offered the first sets of codes to its customers on April 30. It continued, saying:

“Additional functionality will be released at approximately eight-week intervals, culminating in full functionality in the CDE by mid-2020.”

With the CDE, ASX’s customers will be able to interact with the new system and experiment with it. They will be given access to design, build and run tests on some of the system changes, access some functionalities of the new system, and compare different access options as well. Speaking on the new launch, Cliff Richards, ASX’s Executive General Manager Equity Post-Trade Services, said:

“We are proud of this achievement and very grateful for the support of our partner Digital Asset and our customers. While we believe distributed ledger technology offers exciting opportunities for the whole market to innovate, there is much still to do. We continue to work closely with our customers as we progress towards delivery of the new system.”

Full speed ahead

The CDE scheme is a joint venture between the ASX and Digital Asset Holdings, a blockchain firm based in the United States. The launch of the blockchain system was first announced back in April 2018, with the exchange setting a timeline that will see it launched between Q14 2020 and Q1 2021.

However, the company released its CHESS Replacement: New Scope and Implementation Plan in September 2018, claiming that it had chosen to push back the transition to a blockchain-based system by six months after receiving consultation feedback. Upon the postponement, a new target of March to April 2021 was set for the blockchain platform’s earliest commencement.

That timeline was maintained in this new announcement, with the company claiming that it is “on-track to go-live with the new DLT-based system in March-April 2021.” The new system can be accessed directly by customers via a DLT node, which, according to the company, will provide access to synchronized, real-time data. It also provides some other connection options, including a web browser (in situations of low-volume, infrequent usage), and the ISO 20022 global messaging standard via AMQP and SWIFT.

About Jimmy Aki

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Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.

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