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Australian Securities Exchange Partners with VMware to Go Blockchain in 2021

Applying Blockchain to CHESS, the Australian Securities Exchange (ASX) will use blockchain for its registry, settlement and clearing system by 2021.

A recent press release shows a new agreement with the NYSE listed companies namely VMware and Digital Asset holding and the ASX for the replacement of the CHESS system by 2021. The three-party memorandum of understanding (MoU) with these companies will merge blockchain projects in Australasia and equally the coordination to restore the equities clearing and settlement.

Additionally, the MoU consists of supporting the open-source smart contract, especially the programming language called DAML (partially owned by the ASX).

In 2017, we saw the disclosure for the blockchain replacement of the CHESS system with clear efficiencies such as quicker transaction, decreasing costs and heightened security. The process has experienced delays in terms of implementation as it requires lengthy periods for user development and testing. The first implementation in early May 2017 exhibited the first code app on the new platform called the “Customer Development Environment.”

The ASX deputy confirms the alignment of this new partnership with the company’s beliefs as well as its commitment to delivering the distributed ledger technology, on track to replace the CHESS replacement system.

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Australia Securities Exchange Moves For Blockchain Technology, CHI-X Calls For More Regulatory Supervisions

A report by Reuters on October 30, announced that the Australia Securities Exchange (ASX) plans on integrating distributed ledger technology by April 2021, replacing its clearing system, registry, and settlement with the technology for the sole purpose of cutting costs for customers. However, Chi-X, its only competitor, is afraid of the advantages the technology may bring to ASX and thus calls for more regulatory supervision on the issue.

CHI-X being concerned that the switchover to distributed ledger could give ASX an unfair advantage over them in areas where both companies compete made Chi-X General Counsel, Michael Soms, suggest that this should be regulated since it would be difficult for competition to bridge the moat of clearing and settlement.

“There’s a substantial moat around the ASX clearing and settlement business, and the CHESS replacement project is perhaps making it bigger. It would be challenging for the competition to bridge that moat – I’m not saying it won’t happen- but it needs to be regulated as if it won’t,” Soms said.

“There should be a legislative framework whereby the Australian Competition and Consumer Commission can act as an arbitrator in disputes. That should happen as soon as possible.”

However, a spokesman for the ASX said that the issue was a concern for the government since they are engaging closely with both government and regulators.

“We are continuing to engage closely with government and regulators, including the ACCC, throughout our CHESS replacement programme. We are focused on building a platform for the future that will stimulate further innovation and competition,” the spokesman said.

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Australian Securities Exchange Postpones Migration to Blockchain Settlement System Due to Coronavirus Concerns

The Australian Securities Exchange (ASX) has further delayed the launch of its new blockchain settlement system because of uncertainty surrounding the coronavirus pandemic.

Since December 2017, ASX has been working on its blockchain system that will replace the current CHESS (Clearing House Electronic Subregister System). The full transition to the new system was initially planned for April 2021. But due to various reasons, including the upheaval and uncertainty caused by the COVID-19 outbreak, the ASX will have to delay the deployment.

Coronavirus delays product development

Financial results, meet-ups, conferences, and new product launches have been affected by the coronavirus crisis since February 2020. The Australian Securities Exchange is the latest coronavirus victim, being forced to postpone the launch of its new blockchain-based post-trade solution. Powered by a permissioned blockchain, the post-trade system would enable fast and effective trade settlement and clearing.

Other reasons for delaying include requests for additional functionality, feedback on timing, and also the ASX requires more time for preparation and development.

Users already have full technical documentation necessary for integration. The first code was released nearly a year ago, with updates being initiated every eight weeks.

This is not the first delay for the project, which began in December 2017. ASX initially expected the new blockchain system to go live by the end of 2020. The exchange then delayed the launch of the system until April 2021. Now again, the launch has been pushed back to an unspecified time in the future. ASX will carry out user consultation in June and then come up with the new schedule.

ASX highlighted: “In recent days, ASX has received further comments on the ability of users to focus on the CHESS replacement project. Many companies in the sector, including ASX, are operating with a large part of their staff working from home. The possibility of participating in coordinated preparation activities later in the year is unclear.”

The full release of the new blockchain settlement system has now been put on hold and remains unknown. However, the product will go ahead with the testing, which is expected to take place in July 2020. The exchange is targeting to launch the ITE (industry test environment) in July to validate procedures, processes, and systems. The exchange stated that this would be a crucial milestone toward the deployment of the new system and would initially be provided only to back-office software developers. ASX is also aiming the ITE to be opened to all users in October 2020, depending on the feedback from the consultation event due to happen in June.

Peter Hiom, the deputy CEO of ASX, said: “ASX remains fully committed to CHESS replacement. We continue to progress the project, including system development and testing, supporting back-office software developers, and assisting users in their readiness activities. The investments we are making in the new system and in distributed ledger technology are for the long-term benefit of the financial services industry and the Australian economy.”

ASX confirmed to go blockchain in 2021

The Australian Securities Exchange has been working in partnership with blockchain company VMware and Digital asset holding to replace its existing CHESS system for a new blockchain system for the past three years. The blockchain-based settlement system has several benefits at hand. For example, the new system eliminates the need for every participant to send messages to a centralized CHESS system. Rather, participants have a better option to operate their own server or node, which will contain the same data as the other nodes. Furthermore, the new system comes with clear efficiencies like heightened security, decreasing costs, and quicker transactions.

However, the process of launching the blockchain system has encountered delays in terms of implementations as it needs lengthy periods for testing and user development. This time round, the process of product development has been affected by the coronavirus epidemic.

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ASX Delays Blockchain-Based CHESS Replacement to April 2023

The Australian Securities Exchange (ASX) announced the new go-live date for the CHESS replacement system will be pushed to April 2023, delaying the launch by one year, due to replacement scope increasing and the impact of COVID-19.

The announcement says:

“While most CHESS users indicated they could meet the proposed go-live date of April 2022, many asked for extra industry testing, more time to prepare for the new system, and additional functionality that reduces manual processes (such as electronic corporate action elections) to be delivered as soon as possible.”

On the impact of COVID-19 on the CHESS replacement system, ASX Chief Executive Officer Dominic Stevens said:

“ASX has listened to the industry, regulators and its technology partners throughout this project. It is clear that COVID-19 continues to impact the whole industry, including ASX, and this has evolved what our stakeholders want from the CHESS replacement system. In parallel, ASX has considered how we can reduce delivery risk, enhance the customer experience and continuously improve project execution. Consequently, we have increased the scope of the project and extended the timeline. The result is a program that provides a significantly enhanced CHESS replacement solution on Day 1.”

CHESS stands for Clearing House Electronic Subregister System. It is a settlement system for financial products traded on the ASX and operated by the ASX Settlement Pty Limited.

ASX first started to consider a blockchain-based CHESS replacement back in 2015. In January 2016, Digital Asset became the ASX’s technology partner for prototypes with blockchain and DLT technology.