The ASX is getting closer to a blockchain-based core system

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The ASX is getting closer to a blockchain-based core system

Work on CHESS replacement gains momentum.

The Australian Securities Exchange is pushing ahead in its dabblings with the technology underpinning Bitcoin as a potential replacement for its core CHESS post-trade cash equities system.

In January this year the ASX announced it intended to base its new post-trade platforms on distributed ledger technology, following a minority investment in fintech firm Digital Asset that it boosted to an 8.5 percent holding six months later.

The investment formed part of the stock exchange's $50 million, four-year systems overhaul that commenced last year and which will see all the technology underlying its trade and post-trade systems replaced.

The ASX said it wanted to ascertain whether the blockchain technology - which works as a decentralised ledger of every transaction ever made, with transactions verified and shared by a global network of computers - can work at the scale of the local equity market.

Rather than use the publicly available blockchain that underpins Bitcoin, the ASX intends to implement a private network where all involved parties will need permission to participate.

The stock exchange today said it had completed development of a working solution for a "subset of use cases" which had met "performance, security and scalability thresholds".

It said it is talking with regulators and stakeholders about the concept of introducing untested technology into the heavily regulated finance industry, and would now focus its attention on building an "industrial strength platform" that could replace its CHESS post-trade equity services system.

It still does not intend to make a decision on the technology that will replace CHESS until next year. CHESS will continue to operate as normal until then.

Around half of the ASX's $50.2 million capital expenditure in its just-ended FY16 fiscal year went towards its technology transformation efforts, the stock exchange revealed at its full-year results briefing today.

To date the program has focused on its trading platforms - derivatives, equities, risk management and market monitoring. The project will move to post-trade technologies next year.

The ASX's average headcount rose almost 2 percent to 534 full-time equivalents in its most recent fiscal year as it applied more resources to the transformation effort. The stock exchange expects the same level of capex for FY17.

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