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ASX Takes First Steps in Introducing Its Blockchain-Based Replacement to Chess

On 30 April 2019, Australian Securities Exchange (ASX) released the first of seven “drops” of software code into the “Customer Development Environment”. This marks the beginning of the introduction of the new equities clearing and settlement system, which ASX is developing to replace the existing CHESS system. The new system is based on distributed ledger technology (DLT) and promises to provide customers with access to real-time, synchronised, source-of-truth data.

ASX’s plan to switch from the CHESS post-trade system to the new DLT system will be the first time that a major market has utilised DLT, a move that is being closely monitored by other major market operators around the world. ASX has secured the support of the Australian Securities and Investments Commission, which has expressed interest in the potential collateral benefits arising from improved data availability, including the ability to more closely monitor the activities of brokers, clearing participants and the clearing house itself. Following extensive industry consultation, the schedule for implementing the system was initially delayed due to concerns around the scope of the changes required. More recently, however, ASX has confirmed that it remains on track to “go-live” with the new DLT system in March – April 2021.

The introduction of the new technology has not come without criticism. Prior to the release of the first “drop”, a working group, which comprises key stakeholders (including a number of share registries), accused ASX of using the CHESS replacement to further strengthen its monopoly in post-trade settlement. ASX has maintained that it continues to comply with its regulatory obligations and has provided the following timeline for the introduction of the new DLT-based system:

  • “Industry Wide Test Environment” is planned to be available from July 2020;
  • “Pre-Live Production Environment” is planned to be available from October 2020; and
  • “Target Go-Live” window is March – April 2021.

Further information can be accessed by clicking here.

Andrew Fay contributed to this piece.

Copyright 2019 K & L Gates

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

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Felix Charlesworth, KLGates, Financial attorney
Attorney

Mr. Charlesworth is a commercial and regulatory lawyer with a focus on the financial services industry.

 Mr. Charlesworth advises on a range of regulatory and compliance issues relevant to wholesale and retail fund managers, financial advisers, superannuation fund trustees and other financial services entities. He also has experience in advising multinational corporations about compliance measures targeted at the prevention of bribery and corruption. 

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