The Australian Stock Exchange (ASX) has made an announcement that may qualify as the biggest bet the financial industry has placed on Blockchain technology yet. In a move that is certainly going to spark conversations worldwide, the Australian bourse disclosed on Thursday (December 7, 2017), that it will phase out the current clearing system and replace it with Blockchain to process equity transactions.
According to the ASX deputy chief executive, Peter Hiom, Digital Asset Holdings, the tech startup run by a former JP Morgan Chase & Co, Blythe Masters, will provide the technology. Mr Hiom added in a media conference call that, “ASX is the first stock exchange to consider taking such a step.”
This development is likely to increase the hype that Blockchain has experienced especially after banks begun conducting a number of experiments and even a few deployments that aimed at bringing the technology to the mainstream. Blythe Masters admitted that “today’s announcement delivers the first meaningful proof that Blockchain technology can live up to its potential.”
Embracing nascent technology
That ASX has chosen this path is not surprising; rather, what is worrying is that other major exchanges aren’t already talking about a similar move. Mader Naeimi, the director of dynamic markets at the Sydney-based global investment management firm AMP Capital said, “it surprises me that ASX is doing it ahead of other big exchanges.” He thinks that this is an undoing of such exchanges, adding that, “when such a technology becomes available, you have to embrace it.”
Though the announcement did not give a definite date when the shift from the operation Clearing House Subregister System (CHESS) to the new technology will happen, indications show that the new system will be ready for market feedback by March 2018 at the very latest. However, the ASX statement said that the date of its final implementation depends on the consultation ASX will carry out with the stakeholders.
ASX has had interest in Blockchain for a while now. Its collaborations with Digital Asset in developing the new system started back in January 2016.
The chief executive of the ASX Dominic Stevens said that the new technology would enable customers to incur lower costs of transactions and discover new services from the real-time data generated post-trade. He added that “the system would have a design that has zero or limited access barriers, if any, to the non-affiliated market operators or the clearing and settlement facilities.” This, according to the statement, should give ASX customers the liberty to choose how to use the post-trade services.
Exit CHESS, enter the Blockchain dragon
The Chess system was deployed in the ‘90s and has grown archaic. Therefore, ASX sees the impending upgrade as a usual operational procedure. The chief executive Dominic Stevens views the switch as a marginal cost that fits well within the ASX’s capital expenditure program.
The exchange seemingly has courted Blockchain from diverse avenues. Data available to the press indicates that ASX is one of the leading investors in Digital Asset, a tech startup that is offering its customers a window into Bitcoin and other digital assets. Other major investors include CME Group and JPMorgan.
Following the announcement, ASX shares closed the day trading at A$ 57.33, a 0.7% rise from the figures of the previous session.