Australian Securities Exchange commits to blockchain upgrade

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The Australian Securities Exchange (ASX),has confirmedthat it will upgrade its legacy clearing and settlement platform, CHESS, with a new, blockchain-based infrastructure built by blockchain technology fintechDigital Asset.

The platform will still need to be prepared for handling live trades, however, and the decision will have to be approved by the ASX’s stakeholders over the next four months, the exchange added. The result of this consultation, as well as an implementation deadline, will be presented in March 2018.

The ASX has been a long time arriving at this point, but the outcome is highly promising. After first announcing plans to use Digital Asset’s platform in 2016, the ASX ran into stakeholder pushback in January 2017, as its brokers claimed the exchange’s $22 million investment in the startup meant it hadn’t been able to objectively consider other, potentially more appropriate solutions. Subsequently, the ASX itself put the brakes on the upgrade in August and mandated a third-party review of Digital Asset’s platform to to prove its ability to operate at enterprise grade. At the time, the ASX hinted that should the results be negative, it would consider other options. That the ASX is now comfortable announcing its commitment to the platform indicates the tests were satisfactory, and that the ASX believes that the platform it will work.

The exchange still has some tough work ahead to actually implement its new system.It’s now clear that the ASX itself has confidence in blockchain technology’s ability to underpin an exchange, and there’s precedent that justifies its bullishness — large enterprises like the DTCC in the US, a major clearing house, have implemented similar systems. However, even setting aside possible further resistance from its stakeholders, the fact remains that the ASX is essentially undertaking a core system overhaul, which are notoriously risky, costly, and lengthy procedures. As such, even if consensus is arrived at, it will take some time, and likely multiple pitfalls, before Digital Asset’s platform is unleashed.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on blockchain in banking that:

• Outlines banks’ experiments with blockchain technology.
• Details blockchain projects at three major banks — UBS, Credit Suisse, and Banco Santander — based on in-depth interviews.
• Discusses the likely trends that will emerge in the technology over the next several years.
• Highlights the factors that will be critical to the success of banks implementing blockchain-based solutions.

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