The Australian Securities Exchange (ASX) is updating its broker platform with blockchain-based technology. The upgraded CHESS system has been undergoing rigorous testing to ensure it can deal with the increasingly large sharemarket in Australia.
The Clearing House Electronic Subregister System (CHESS) is essentially the ASX’s system for securing, settling and clearing the Australian AU$2.5 trillion sharemarket.
The Need For Blockchain Technology
The exchange started the replacement project in 2015 and selected Digital Asset as its technology partner in January 2016 to develop a prototype based on blockchain technology. The new system improves on the previous one by creating a “single source of truth” through distributed ledger technology, where previously messages of ownership were sent back and forth leading to multiple records of share ownership.
At the start of the Covid-19 pandemic, trading volumes had reached unprecedented levels, hitting equity volumes around 7 million trades a day in March 2020 compared to normal daily averages around 2 million. Thus, creating a scalable solution became imperative.
The New System Might Not Be Available to the Public until Mid-2022
The project has already been delayed three times. In September 2018 ASX pushed the live date to late 2020, and in July 2020 it was further extended to April 2022. The testing program will continue to the end of the 2022 calendar year before the system goes live in April 2023.
One of the reasons for this extension was to allow participants and regulators to cope with the volatility of early pandemic trading, and then to allow the new system to be redesigned to accommodate a huge increase in trading volumes.
ASX chief executive Dominic Stevens said the synchronised ledger was being stress-tested to see if it could deal with high daily trading volumes, with about 40 market participants also testing the clearing and settlement system’s new code. By the end of July, ASX predicts it will have completed the code and will publish this into a “customer development environment” at the end of August.
The project is moving to operational implementation, as opposed to a technology build. We are reaching that turning point over the next six months.
ASX Chief Executive, Dominic Stevens
Since the ASX’s equities trading outage last November, some have questioned the necessity of such an ambitious technological endeavour that has far-reaching economic implications.
It needs a lot of testing as it’s a big ecosystem of value. But when you look at what was [designed] during the course of 2018, that is basically finished and is out there in the market.
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