The Australian Securities Exchange (ASX) has disclosed that millions of dollars in savings could be generated by Australian firms once the exchange migrates from the existing Clearing House Electronic Subregister System (CHESS) to a blockchain technology-based platform.
Currently, it is estimated that the average fee that large investors are charged for clearing and settlement services is approximately 1.2% of the assets. The superannuation industry, on the other hand, incurs costs of approximately $23 billion.
“If the value of what we can deliver by providing an enriched, real-time source of truth information to the industry ultimately allows the industry to offer new services that create only 5% incremental revenue or cost savings to end-issuers and investors, we think it’s absolutely worth pursuing,” the CEO of ASX, Dominic Stevens, said during the exchange’s full-year results briefing.
Simpler, Faster, Cheaper
According to Stevens, adopting distributed ledger technology will make reconciliation processes redundant as participants will be in a position to access the correct data in real-time without having to consult the securities exchange. Additionally, a DLT-based system will reduce risk and costs as well as complexity. Currently, there are many disparate databases and supporting, upgrading and maintaining them is expensive. The adoption of distributed ledger technology will also spur innovation.
“By doing all of this within a highly secure environment where permissioned users have access only to the data that they are entitled to see, ASX is safely liberating the source of truth information in real-time such that it can be used by participants and other providers to build new services across the value chain,” Stevens added. “This will provide tremendous value by being a great business enabler for our customers, and a significant enabler of innovation for issuers and investors.”
One Harmonized Database
Unlike the CHESS platform which has multiple versions of multiple applications programmed in multiple languages residing on multiple databases, the ASX’s DLT-based system will use a standard modeling language for Ethereum-like smart contracts and this will sit on a harmonized database.
So far ASX has spent 3 years researching and developing the technology which is expected to go live in two years. This will make it the world’s first industrial-scale application of blockchain in critical financial market infrastructure. Development of the distributed ledger technology to replace CHESS will be done in collaboration with Digital Asset Holdings, a fintech firm based in New York. ASX Limited owns a 5% stake in the startup.
As our site reported at the time, ASX initially began considering replacing its CHESS platform with a blockchain-based one in October 2015 when it was headed by Elmer Funke Kupper. Early the following year, the world’s16th biggest exchange announced that it had picked Digital Asset Holdings to develop the blockchain-based system.