ASX blockchain-based CHESS project still in testing

The securities exchange is yet to determine if blockchain is the best solution to replace its equity clearing and settlement platform, with a final decision expected by March 2018.
Written by Asha Barbaschow, Contributor

The Australian Securities Exchange (ASX) has said that its new post-trade solution to replace its legacy Clearing House Electronic Subregister System (CHESS) platform is still in testing phase, with the software on track for assessment in December by a third party.

The ASX is anticipating a final consultation on the blockchain-based technology to occur by March 2018, when it will determine if distributed ledger technology (DLT) is in fact the right solution.

The ASX announced in June 2016 that it was building a new post-trade solution using blockchain technology, asking for market feedback. This followed the ASX enlisting US-based firm Digital Asset at the start of last year to help it develop blockchain solutions for the equity market.

The organisation has been planning to replace or upgrade its trading and post-trade platforms for over two years, announcing in September that it had a complete prototype and was now moving to building an "industrial-strength solution" to use as its equity settlement and clearing platform.

If given the green light, the blockchain-based solution will replace the legacy CHESS platform as a more efficient mechanism at the exchange, which the ASX previously touted as having the ability to significantly improve the efficiency of clearing and settlement -- not only for the organisation, but for its customers as well.

The ASX also said previously that the new CHESS trading platform will provide 24-hour OTC clearing and OTC client clearing enhancements that it expects will provide "contemporary" technology and additional functionality.

During the 2017 financial year, the ASX said it conducted industry-wide consultation, including quarterly webinars with over 150 participants; performed demonstrations of the blockchain-based technology to 110 companies from global finance companies; held a series of engagement workshops; and arranged six business committee meetings.

In its yearly results released on Friday, the exchange reported AU$434.1 million in after-tax profit, up AU$7.9 million from last year's total.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at AU$583.2 million, while revenue saw a AU$17.8 million year-on-year increase to AU$764.1 million.

Expenses for the reported period rose by 6 percent to AU$180.9 million, and capital expenditure was AU$50.3 million. The spending related to continued infrastructure upgrades, CEO Dominic Stevens said, which included progress on the DLT project and the new futures trading platform.

During the 12-month reporting period, the ASX sent its new futures trading platform live.

The system, in operation since March, replaced the SYCOM platform that was introduced in the late 90s. Approximately 50 ASX participants and 30 additional customers comprising global data vendors and software providers were leveraging the system as of June 30, 2017.

Seven systems, comprising 17 separate applications, were decommissioned and 20 databases across multiple environments eliminated with the new platform.

The new platform provides the exchange with "richer functionality and technical enhancements", including real-time platform and user interface monitoring, speedier transaction times, and the faster resolution of customer issues, the ASX said on Thursday.

The ASX said its go-live ran smoothly and its customers provided positive feedback.

In the 12 months to June 30, 2017, the ASX also completed the setup of its Cybersecurity Command Centre.

Looking ahead, the ASX is expecting to report AU$50 million in after-tax profit for FY18, hoping to also accelerate its market announcement platform, upgrade and expand ASX Net, and upgrade its secondary datacentre.

Annual listings on the exchange were up in FY17 by 5.5 percent. The ASX said the technology sector is now the third-largest by number of listings and continues to grow, with 40 new listings in the 12-month period.

As of June 30, 2017, 51 listed companies hailed from New Zealand, 39 from the United States, 17 from Singapore, 16 from Israel, 10 from Malaysia, and two from Ireland.

For the first half of the 2017 financial year, the ASX reported after-tax profit of AU$219.4 million, on revenue of AU$386.6 million.

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