Capital markets News

ASX delays blockchain settlement system to 2023

asx australian securities exchange

Today the Australian Securities Exchange (ASX) announced it is postponing the launch of its blockchain settlement system CHESS to April 2023. Four months ago, it proposed a year’s delay to April 2022 and opened a public consultation. At go-live, the platform will include features that were originally planned for the version 1.1 release.

As outlined in June, the COVID-19 crisis resulted in a massive spike in ASX trading volumes, which meant the exchange needed to recalibrate scaling demands on the distributed ledger technology (DLT) CHESS system. 

There was also a call to include corporate actions such as dividend reinvestment plans (DRP) and bonus share plans (BSP). That was a topic that received pushback from some share registrars who earlier initiated antitrust complaints against the ASX. Those share registrars, which include Computershare, were pushing for an additional year. So it looks like a win for them.

Another feature that will be available at launch is instant settlement or non-batch bilateral delivery versus payment (DvP). Other additions include more extensive testing.

CEO comments

Dominic Stevens, ASX CEO, said: “ASX has listened to the industry, regulators and its technology partners throughout this project. It is clear that COVID-19 continues to impact the whole industry, including ASX, and this has evolved what our stakeholders want from the CHESS replacement system. In parallel, ASX has considered how we can reduce delivery risk, enhance the customer experience and continuously improve project execution. Consequently, we have increased the scope of the project and extended the timeline. The result is a program that provides a significantly enhanced CHESS replacement solution on Day 1.”

Stevens continued: “The functional scope, capacity, scalability and testing of the CHESS replacement system now being developed is greater. It captures the increased requirements of ASX and the industry, and lowers the risk in delivering them. It is also consistent with ASX addressing the expectations of the regulatory agencies that CHESS be replaced as soon as it can be achieved safely and that the new system meets the market’s needs.”

“By its nature, a consultative process that considers all industry feedback will not satisfy everyone. We acknowledge those who have been working hard and would have preferred a faster delivery time.”

“However, replacing CHESS is an important and innovative project, with significant long-term benefits for Australia’s financial market users. It is ASX’s responsibility to deliver it in a safe and timely manner, and to consider the feedback from all our stakeholders. We thank all our industry participants, who are working in collaboration with us to ensure the successful delivery of the new system, as well as the ongoing engagement of our regulatory agencies,” said Stevens.

Other issues raised by industry feedback

Some of the industry responses sought additional information from the ASX. This includes data about pricing and a data governance framework.

Understandably information has been requested about the go-live process where there will be a single cutover from the old to new system over a weekend.

The platform uses VMWare’s Blockchain with Digital Asset’s DAML for the smart contracts.

With this delay, there’s a possibility that the ASX will not be the first major stock exchange post-trade system to go live. The Swiss stock market SIX plans to launch it’s SIX Digital Exchange (SDX). While that’s likely to go live next year, the SDX platform will operate with new digital assets compared to the ASX, which will use the CHESS DLT clearing and settlement system for the entire market.