Distributed Ledger technology finds another niche in the financial sector, as ASX Ltd looks to roll-out a system that’s been in development for over two years.
Following an announcement back in early 2015 stating its intention to replace or upgrade all of its main trading and post-trade platforms, and its acquisition of a minority stake in distributed ledger tech firm Digital Asset Holdings in 2016, the Australian Securities Exchange (ASX Ltd) has published a working paper outlining its plans to put in place a blockchain-based post-trade system before the end of 2020. The new system, which represents phase 2 of its long-term update strategy following an overhaul of its trading and risk management systems, will replace the existing Clearing House Electronic Subregister System (aka: CHESS).
The new announcement, essentially makes good on promises made when ASX bought Digital Asset Holdings in early 2016. Then, it suggested 6-12 months of development before a decision on the future direction of the post-trade solution would be made in 2017. That timescale obviously slipped somewhat, as the commitment to adopting a blockchain-based solution only came at the very end of last year.
ASX addresses this two-and-a-half year ellipsis in its outline, stating that the time has been spent “collecting and assessing user inputs to business requirements through an extensive consultation process across a diverse set of users during 2017”. As befits a project to replace a system that has been in mission-critical operation for some 25 years, we’re told this was “a rigorous process, including initial independent 3rd party technology assessments, to enable ASX to assess the functional, capacity, security and resilience capabilities of DA’s DLT-based platform for use as the basis of the new system and to confirm that it will meet the needs of Australia’s equity market (including for improved record keeping, reduced reconciliation, more timely transactions and better quality data) and maintain the highest regulatory and operational requirements.”
The ASX seems somewhat ahead of the game in supporting and rolling out a blockchain solution in this application, though increasingly the technology is being embraced – or at least touted – as a potential solution or improvement for a whole host of applications in finance, real estate, supply chain and legal situations.
Charles Hayter, CEO at CryptoCompare said, “Post-trade settlements is one use-case for blockchain technology that the banks are particularly excited about. It removes a lot of back-office administrative burden and reduces the time it takes to settle trades – ultimately, it saves them money. Banks have been looking at the blockchain settlement use-case for years and it’s great to see progress. This is all part of further mainstream acceptance of blockchain technology in mainstream banking.”
Testing of Digital Asset’s new system for the ASX will begin in earnest as part of a migration timetable that begins in the second qu-way through 2019. This timetabled rollout period will be punctuated by ‘dress rehearsal weekends’ before the system goes fully live.