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ASX to switch to DLT-based system for trade settlement

The Australian Securities Exchange (ASX) has announced plans to replace Clearing House Electronic Subregister System (CHESS) using distributed ledger technology (DLT) developed by Digital Asset.

ASX uses CHESS to record shareholdings and manage the clearing and settlement of equity transactions in Australia. In early 2016, it selected Digital Asset to replace CHESS with a next-generation post-trade platform using cutting-edge technology.

The latest announcement follows the development and testing of the enterprise-grade DLT software by ASX and Digital Asset over the past two years. The testing included two independent third party security reviews of the platform and was conducted in parallel with a stakeholder consultation program, which included briefing of regulators, to help ASX understand what the market wants in replacing CHESS.

“ASX has been carefully examining distributed ledger technology for almost two-and-a-half years, including the last two years with Digital Asset, in order to understand its potential application. Having completed this work, we believe that using DLT to replace CHESS will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets. While we have a lot more work still to do, today’s announcement is a major milestone on that journey,” Dominic Stevens, ASX Managing Director and CEO, said.

Drawing on its extensive consultation, ASX said that it will continue to work with stakeholders on finalising the scope of Day 1 functionality for the new system. Day 1 functionality and the proposed timing for transition are expected to be released for market feedback at the end of March 2018, said a statement.

In addition, ASX also announced that it will exercise its pro-rata right to participate in Digital Asset’s recent Series B fundraising and subscribe for US$3.5 million convertible notes.

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