Dating back to 2015, the ASX has been developing a replacement for their ‘Clearing House Electronic Subregister System’, also known as ‘CHESS’. While they have a plan, and it is in motion, the popular exchange has suffered various setbacks along the way.
The latest of which is due to COVID-19. With so much market uncertainty, and workforce disruption arising from the pandemic, many of ASX’s partners are simply not ready. As such, in order to provide, both, themselves and their partners with ample time to ready their systems for the eventual upgrade, ASX has postponed the event.
In their public statement, ASX clearly listed COVID-19 as the reasoning behind this delay, by stating,
“ASX is replanning the CHESS replacement implementation timetable due to the uncertainty created by the unfolding COVID-19 pandemic”
This delay will see ASX reconvene in June, to discuss a new launch date for their replacement program. This launch will occur sometime after April of 2021.
In October of 2020, all users of the exchange are expected to be able to begin using the replacement system in a testing environment.
Launched 25 years ago, CHESS is a computer system operated by ASX subsidiary, ASX Settlement. It marked the exchange’s first steps towards electronic shares vs. physical shares. ASX notes that they rely upon this system for two major functions.
- Clearing and settlement of trades
- Electronic registry of shares from listed companies
The system has worked well to date, and will continue to do so until it is replaced. The ASX has noted, however, that they are always looking to the future, and what can be done to streamline operations. The implementation of distributive ledger technology, as a replacement for CHESS, is one of these forward looking moves.
Anticipated Benefits of DLT
While CHESS may have marked a major step forward at the time of its implementation, the 25 year old system has obviously begun to show its age. While fully functional, it simply is not as cost effective, flexible, or quick as what new technologies can provide. The following are a few of the anticipated benefits of DLT, once implemented.
- Clearing Times
- Settlement Times
- Cost Savings
- Reduction in Parties Involved
Once implemented, the ASX will be primed and ready to support what many feel will be a major step forward – the hosting of digital securities.
In addition to outlining the reasoning behind the delay of their replacement for CHESS, ASX Deputy CEO, Peter Hiom, took the time to comment. He stated,
“ASX remains fully committed to CHESS replacement. We continue to progress the project, including system development and testing, supporting back office software developers, and assisting users in their readiness activities. The investments we are making in the new system and in distributed ledger technology are for the long-term benefit of the financial services industry and the Australian economy.”
Australian Securities Exchange (ASX)
Founded in 1987, the ASX operates out of Sydney, Australia. Since their launch, the company has grown into one of the largest full service exchanges in the world. The company describes their full services as including listings, trading, clearing, settlement, tech & info services, and post-trade services.
Deputy CEO, Peter Hiom, currently oversees company operations.
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