The Australian Securities Exchange (ASX) which is working on a blockchain-based clearing and settlement system (CHESS), has released the first Customer Development Environment (CDE) for testing. ASX is the first mainstream exchange to adopt distributed ledger technology (DLT) for its clearing and settlement. Originally announced in 2016, the platform is on track to launch in March-April 2021.
This is just the initial version of the code with additional functionality to be added and released to customers in roughly eight-week intervals with a target of full functionality by mid-2020.
“It represents the first time market participants anywhere in the world can experience the benefits of ‘taking a node’ and establishing direct connectivity to a golden source record of real-time data via distributed ledger technology,” said Peter Hiom, ASX Deputy CEO.
The ASX implementation does not involve consensus between nodes. Instead, DLT nodes are a replica of the operator’s golden source.
Users have a choice of running a node or alternatively using messaging standards such as ISO 20022 via AMQP and SWIFT. In other words, organizations don’t have to run DLT nodes. For some, using messaging may be a smaller technical change. The CDE enables customers to compare the access options, build and test system changes and access new functionality.
According to a March report by Risk.net, to encourage the adoption of DLT nodes, ASX is offering DLT nodes free access for three years, whereas messaging will be charged.
CHESS is based on Digital Asset technology which recently open sourced its DAML smart contracting language. “This is an important milestone for everyone involved in the CHESS replacement project, which continues to proceed according to the implementation timeline set by ASX,” said Yuval Rooz, Digital Asset Chief Executive. “With the delivery of the CDE, ASX customers get their first glimpse of what the new CHESS system can provide.”
Unhappy share registries
The ASX conducted multiple rounds of market consultations and has been transparent in publishing the results where the responses weren’t marked confidential. Share registries, particularly Computershare and Link Administration, have expressed their displeasure as they view ASX as encroaching on their territory. They commissioned a report by Deloitte, and the Australian Financial Review revealed a complaint was sent to the competition watchdog.
Computershare’s consultation response letter stated: “ASX’s proposals reach significantly beyond a technical system upgrade and replacement for CHESS and instead present a reconfiguration of the commercial services performed by various market actors, centralising roles and functions at ASX that are currently provided by competitive commercial service providers.”
In response, ASX has engaged with the relevant parties. Afterward, the stock exchange issued a statement: “ASX had a positive and constructive meeting with representatives from the Working Group. We clarified a number of fundamental misunderstandings – including that we will not mandate the provision of any extra users’ data nor will we be increasing fees to pay for the CHESS replacement project.”
“ASX also committed to invite members of the Working Group, including representatives from the share registries, to join the Business Committee, which is the primary stakeholder governance body for ASX’s clearing and settlement services.”
Additionally, Computershare was the largest outside shareholder of UK-based blockchain market infrastructure company SETL, which plans to enter the Australian market. SETL went into administration in the UK, and the existing team bought the assets.