The Australian Securities Exchange (ASX) is responsible for one of the landmark enterprise blockchain projects, its blockchain clearing and settlement system CHESS, which is scheduled to go live in April 2021. However, for various reasons, including the uncertainty created by the COVID-19 pandemic, the ASX will now consult in June about delaying the rollout.
Other reasons for pushing back the schedule include feedback on timing, additional feature requests, and the ASX also needs more time for development and readiness. However, the stock exchange said it is still aiming to roll out the first phase of the Industry Test Environment in July.
Users already have the complete technical documentation needed for integration. The first code was released almost a year ago, with updates every eight weeks.
This isn’t the first delay for the project, which started in 2016. In late 2018 the ASX pushed back the launch from late 2020 to early 2021.
“In this environment of heightened volatility and activity levels, the industry needs to focus on day-to-day operations,” said ASX Deputy CEO Peter Hiom. “We will therefore wait until June to consult on the new timetable when we expect everyone will have more time to consider the replan and better assess the implications of COVID-19.”
The ASX has extensively consulted with the industry throughout the project. It acknowledged that some users preferred not to have a delay. However, in recent days the stock exchange received further feedback. Both itself and users currently have a large proportion of staff working from home, which is impacting coordination.
Meanwhile, the new settlement system has attracted controversy with different players complaining that CHESS is expanding the ASX’s dominance in the Australian sector. The first to complain to the Australian Competition and Consumer Commission (ACCC) were the share registry firms because share registry data was planned to be a part of CHESS. Computershare and Link Administration were vocal in their opposition during the consultation process and then elevated their reaction.
But more recently, there has been pushback from Chi-X, a competitor that processes 20% of ASX trades and uses the CHESS system. Chi-X appeals to brokers because it has lower fees and brokers claim trades can often be executed at better prices.
Michael Somes, Chi-X’s General Counsel, told Reuters last year: “There’s a substantial moat around the ASX clearing and settlement business…and the CHESS replacement project is perhaps making it bigger.”
The ASX has invested more than $30 million into technology partner Digital Asset. However, more recently, VMWare joined the project and will provide its distributed ledger VMWare Blockchain, while Digital Asset’s DAML is the smart contract language being used. Unlike other blockchain projects, in the case of CHESS, the stock exchange operates the golden source node, and others are purely replicas.
The ASX and the technology partners also plan to offer blockchain solutions beyond CHESS.