ASX Head Says New DLT System Could Save Billions

The Australian Securities Exchange could save as much as $23 billion in its effort to replace its settlement system with a distributed ledger, its CEO announced Thursday.

Dominic Stevens, managing director and CEO of ASX Limited – the exchange's operator – explained how using distributed ledger technology (DLT) in place of its existing Clearing House Electronic Subregister System (CHESS), would offer greater efficiency than CHESS does in transmitting messages and accessing information.

At present equity clearing and settlement costs the industry roughly $100 million alone, and the total cost of all communications and other issues to the "super industry" is closer to $23 billion, Stevens said. Moving to DLT "will provide tremendous value by being a great business enabler for our customers, and a significant enabler of innovation for issuers and investors."

"All day every day, participants send messages back and forth to the CHESS database to make sure they are perfectly reconciled with it. This process is prone to errors and expensive to fix. The databases of participants can also be different, meaning there are multiple versions of software essentially doing the same thing," he said during a presentation.

These are problems that a distributed ledger can solve, he added.

With the new system, participants will run nodes instead of sending messages, and connect to the whole database instead of having many "disparate databases," which will help to eliminate errors. However, those customers who don't want to run nodes will still be able to receive messages "in a similar fashion to how they do today."

ASX announced earlier this year that it was seeking feedback on its proposal to use DLT in place of CHESS, and Stevens confirmed Thursday that the exchange is looking to roll the system out by the end of 2020.

The platform is based on technology by Digital Asset Holdings, of which ASX is a partial owner. In the future, it can operate not only for the equities, but potentially also settle of bonds or other asset classes, he said.

Australian flag image via Shutterstock