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ASX to replace ageing settlements system with blockchain technology


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The Australian Securities Exchange will collect market feedback to determine and set an implementation date.

The Australian Securities Exchange (ASX) plans to replace its current clearing house system, which records shareholdings and manages equity settlements, with contemporary distributed ledger technology (DLT).

This will be the first major overhaul of Australia's clearing and settlement facility in almost 30 years. The current Clearing House Electronic Subregister System (CHESS) was introduced in May 1990. It provided name-on-register functionality, electronic communications and removed the need for physical paper share certificates.

At the end of March 2018, the ASX intends to collect market feedback in order to determine when the new blockchain system will become fully operational and how the transitioning process will work.

The enterprise-grade DLT software was constructed by ASX, in collaboration with technology partner Digital Asset, to perform core equity clearing and settlement functions, and has been tested over the last two years.

This testing included two independent third party security reviews of the software, as well as a stakeholder consultation program, which included briefing regulators in order to properly understand marketplace needs.

The new system will be operated by ASX on a secure private network where participants are known, must be "permissioned" to gain access, and will have to comply with ongoing and enforceable accountability measures.

The DLT system will provide ASX customers with the ability to choose how they use post-trade services. Customers will connect in a way similar to the current system but will be able to utilise the universal financial industry message scheme, ISO 20022, or, if they prefer, interact directly with the ledger technology itself.

The possibilities of blockchain have been lauded across many industries, particularly in the past two years. But according to speakers at the Global Mobile Internet Conference, held in Sydney this week, companies have barely scratched the surface of what can be achieved by taking advantage of distributed ledger technology.

In October, IBM joined forces with blockchain startup Stellar and payments company KlickEx Group to enable high-speed cross-border payments for banks and other financial institutions. IBM expects to add more banks and process up to 60% of these payments in the South Pacific's retail foreign exchange corridors by early 2018.

In September, FlashFX became the first company to receive an ASIC licence for blockchain money transfers.

This technology is being applied in many ways. Find out why the first blockchain smartphone is such a big deal.

Stay up to date on everything happening in Australia's burgeoning fintech industry by checking out our weekly fintech round-up and our insightful fintechFIVE series, shedding light on innovative companies and ideas.

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