ASX to switch to DLT-based system for trade settlement

Marco Green
December 7, 2017

Last year, Wall Street banks including JPMorgan and Citigroup Inc. successfully tested blockchain ledger technology on credit-default swaps.

The Australian Securities Exchange (ASX), will move the settlement and clearing of the $2 trillion Australian cash equities market onto blockchain-inspired technology being developed by a NY start-up. Come January 2016, the ASX paid AUD14.9 million for a 5% equity stake in blockchain-startup Digital Asset Holdings, the latter which went on to develop ASX's newly adopted blockchain solution.

The transition is expected to start next year, with the timing to be decided around the end of March.

The main stock exchange in Australia has announced it will replace its current clearing system with a blockchain (or distributed ledger technology) system.

Singapore also has a link to Masters as she was appointed to the key advisory panel set up by the Monetary Authority of Singapore.

Stevens said the ASX has been examining DLT for nearly two-and-a-half years, including the last two years with Digital Asset in order to understand its potential application, and has used independent third-party security to review the new technology.

The exchange has been looking at the possible adoption of the technology for more than two years as an alternative to developing an update for its Clearing House Electronic Subregister System, or Chess, which was introduced more than 20 years ago as a replacement for paper share certificates.

"Together, we look forward to continuing to work with the industry as we finalise the requirements and the roadmap for implementation of the new system".

Blockchain is a technology that provides a public ledger of transactions used as the foundation for digital currencies such as Bitcoin.

"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".

DLT software will settle and clear equity trades across a network where participants are known or "permissioned" to have access and must comply with the exchange's ongoing and enforceable obligations.

"After so much hype surrounding distributed ledger technology, today's announcement delivers the first meaningful proof that the technology can live up to its potential", he says. It does this while maintaining confidentiality and scalability - both critical for market infrastructures. It said Thursday it would exercise its right to take part in Digital Asset's recent fund raising, buying US$3.5 million in convertible notes. This agreement applies while the Day 1 functionality of the new system is being finalised, and will continue subject to agreement of the full contractual arrangements for the development and support of the new system.

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