Australian Stock Exchange completes blockchain prototype to replace CHESS system

Rage Comment : The Australian Stock Exchange (ASX) has completed the initial stage of blockchain technology analysis and entered the next stage of this journey. In the next 18 months, ASX and Digital Asset Holdings will build an industry advantage platform that can replace CHESS (Clearing House Electronic Subsidiary Registration System) for a long time. At the same time, ASX said that it does not want to change the current regulatory framework. What needs to be changed is the verification, authorization, evaluation and storage of data. Only in this way can the authenticity of the data source be guaranteed, some unnecessary cumbersome processes can be eliminated, and significant benefits can be brought to the industry.

Translation: Nicole

The Australian Securities Exchange (ASX) has completed the first phase of its blockchain research to replace its CHESS (Clearing House Electronic Subregister System), which provides clearing and settlement services, with a blockchain-based system.

Considering the potential of the distributed ledger technology underlying bitcoin, the ASX operator announced earlier this year that it had acquired a stake in US company Digital Asset Holdings.

Dominic Stevens

Speaking at the full year results presentation today, ASX CEO Dominic Stevens said:

“We have completed the initial phase of technical analysis and are beginning to move on to the next phase of this journey.”

Deputy CEO Peter Hiom said “tremendous progress” had been made in exploring applications for distributed ledger technology over the past few years.

Hiom said:

“With the first phase of development now complete, we have increased our investment in Digital Asset Holdings to begin the next phase of development. Over the next 18 months, ASX and Digital Asset Holdings will build an industry-leading platform that can replace CHESS in the long term.”

“ASX is currently engaging with consumers and shareholders on platform requirements and the final decision on whether ASX will use blockchain technology will be made in the 2018 financial year.”

Hiom said there are some key differences between the “permissioned distributed ledger technology” being trialled by the ASX and the public blockchains employed by digital currencies.

Peter Hiom

He said:

“The main difference I want to highlight here is that public blockchains are usually run on unregulated markets where anyone can anonymously access this market information through a public or permissionless network.”

“The security of the network is publicly auditable and, if compromised, could allow someone to anonymously and unilaterally move digital currency across a public network. This method of operation is unacceptable in the highly regulated ASX markets.”

“Beyond that, the underlying blockchain technology is enabling a lot of new applications for highly regulated markets like the ones operated by the ASX. What really interests us is the data architecture, or distributed ledger technology.”

He said the ASX had no desire to change the current regulatory structure.

Hiom said:

"What we have changed is the way data is verified, authorized, evaluated and stored. This way we can ensure the authenticity of the data source, remove some unnecessary cumbersome processes, and bring significant benefits to the industry."

The deputy CEO said that so far, there have been no obvious "red flags" regarding scalability and performance.

The ASX reported an increase in operating expenses, to $170.6 million, a 6.5 per cent rise in the 2016 financial year, with the company investing part of the proceeds in its technological revolution projects.

Stevens said:

“We are in the midst of a period of significant reform, more specifically, we are replacing or modernizing our trading, regulatory, risk and clearing systems, exploring post-trade innovation through the use of distributed ledger technology, and improving connectivity for consumers both domestically and internationally.”

The company reported annual revenue of $746.3 million, up 6.5%, and net profit after tax of $426.2 million.