ASX Under Pressure to Further Delay Rollout of DLT Settlement System

The Australian Securities Exchange (ASX) has come under pressure to further postpone the launch of a blockchain replacement for its decades-old settlement and clearing system.

One of the main share registry companies in Australia, Computershare, told the Financial Times (FT) on June 25 that it was seeking a two-year delay to the implementation of the ASX’s new blockchain-based system because the new project “lacked clarity.”

The Clearing House Electronic Subregister System, or CHESS, is the existing infrastructure responsible for clearing and settlements of trades and transactions on the ASX’s network. The stock exchange is planning to overhaul the current system with distributed ledger technology to enable same-day settlements.

Concerns raised by Computershare relate to a claimed lack of clear information on the technical and operational aspects of CHESS, the fee structure for new services and how regulation would be implemented and governed on the new system.

Several ASX clients have also expressed their concerns over the ASX’s ability to increase its dominant market position for clearing and settlement into other markets including share registry services, per the report.

“This [new platform] is owned by ASX and the ASX is a monopoly, it’s not ideal. I don’t believe they should own it,” Tony Cunningham, founder of Perth-based stockbroker CPS Capital, told the FT. “If ASX have a distributed ledger, then why do you have a share registry?”

After a series of studies were conducted in August 2017 relating to the viability of DLT systems for the purpose of settlement and clearing, the ASX finally said yes to settling trades using DLT with a planned launch date previously expected in April 2021.

The DLT CHESS replacement has faced several road bumps including in 2018 when the ASX decided to postpone the proposed date over concerns raised by respondents detailing whether the implementation window of Q4 2020 to Q1 2021 was achievable. This March, it further delayed the launch due to concerns over the coronavirus pandemic.

The rollout looks likely to face further setbacks, with the stock exchange having just agreed to another “short delay,” as reported in the FT.

“We know there are stakeholders who want a small change to the go-live date as well as those who are seeking for more time,” the ASX said as per FT reporting. “We will listen carefully to the consultation feedback prior to finalizing the revised implementation timeline.”