The Australian Securities Exchange (ASX) has disclosed that millions of dollars in savings could be
generated by Australian firms once the exchange migrates from the
existing Clearing House Electronic Subregister System (CHESS) to a
blockchain technology-based platform.
Currently, it is estimated that the average fee that large investors
are charged for clearing and settlement services is approximately 1.2%
of the assets. The superannuation industry, on the other hand, incurs
costs of approximately $23 billion.
“If the value of what we can deliver by providing an enriched,
real-time source of truth information to the industry ultimately allows
the industry to offer new services that create only 5% incremental
revenue or cost savings to end-issuers and investors, we think it’s
absolutely worth pursuing,” the CEO of ASX, Dominic Stevens, said during the exchange’s full-year results briefing.
Simpler, Faster, Cheaper
According to Stevens, adopting distributed ledger technology will make reconciliation processes redundant as participants will be in
a position to access the correct data in real-time without having to
consult the securities exchange. Additionally, a DLT-based system will
reduce risk and costs as well as complexity. Currently, there are many
disparate databases and supporting, upgrading and maintaining them is
expensive. The adoption of distributed ledger technology will also spur
innovation.
“By doing all of this within a highly secure environment where
permissioned users have access only to the data that they are entitled
to see, ASX is safely liberating the source of truth information in
real-time such that it can be used by participants and other providers
to build new services across the value chain,” Stevens added. “This will
provide tremendous value by being a great business enabler for our
customers, and a significant enabler of innovation for issuers and
investors.”
One Harmonized Database
Unlike the CHESS platform which has multiple versions of multiple
applications programmed in multiple languages residing on multiple
databases, the ASX’s DLT-based system will use a standard modeling
language for Ethereum-like smart contracts and this will sit on a
harmonized database.
So far ASX has spent 3 years researching and developing the
technology which is expected to go live in two years. This will make it
the world’s first industrial-scale application of blockchain in critical
financial market infrastructure. Development of the distributed ledger
technology to replace CHESS will be done in collaboration with Digital Asset Holdings, a fintech firm based in New York. ASX Limited owns a 5% stake in the startup.
As CCN reported at the time, ASX initially began considering replacing its CHESS platform with a blockchain-based one in October
2015 when it was headed by Elmer Funke Kupper. Early the following year,
the world’s16th biggest exchange announced that it had picked Digital Asset Holdings to develop the blockchain-based system.
