Insights & Analyses

Australian Securities Exchange sees blockchain replacing current post-trade system

September 28, 2017

The company overseeing Australia’s largest stock exchange believes that its future for resolving post-trade settlements lies in blockchain, based on technology created by U.S.-based fintech company Digital Asset Holdings.

Rick Holliday-Smith, chairman of the Australian Securities Exchange, told investors at his company’s annual meeting that blockchain technology is now the leading candidate to replace their current system, according to Finextra.

The current system is the Clearing House Electronic Subregister System, which the ASX uses to record shareholdings and manage the settlement of share transactions. The ASX will device in December whether to replace CHESS with the blockchain solution, but ASX officials said they are now very confident that the switch will take place.

Their hopes were bolstered by a lengthy and successful trial period, in which the Digital Asset Holdings technology has been running parallel to CHESS for 18 months.

Following positive results, the ASX has increased its stake in Digital Asset Holdings from 5 percent to 8.5 percent. To date, the ASX has invested $22.2 million in the New York-based company.

“We are increasingly confident that this technology will help simplify how our marketplace works and should unlock a new era of efficiency and innovation,” Holliday-Smith said.

The ASX, sometimes referred to as the Sydney Stock Exchange, was founded in 1987. It has a market capitalization of around A$1.5 trillion, making it one of the world’s top 15 listed exchange groups.

The CHESS system was first implemented by the ASX in 1994.

If CHESS is in fact supplanted by the new, blockchain-based solution, ASX says the distributed ledger technology could lower risks and associated costs while enabling innovation in the post-trade processing functions of the market. It is said that blockchain technology will enable a more efficient clearing and settlement process, both for the exchange and for its customers.