•The Australian Securities Exchange (ASX) is set to axe almost 200 contractors who were working on incorporating blockchain technology into its CHESS clearing and settlement system.
• The news comes after ASX announced the demise of its seven-year-long project earlier this month, with the company writing down a $170 million pre-tax loss as a result.
• The ASX CHESS (Clearing House Electronic Subregister System) has been operating for around 25 years and manages the settlement of share transactions and records shareholdings across the roughly $3.19 billion of daily trading volume it handles.
• An independent audit by consultancy Accenture revealed a myriad of issues impacting the project, including latency and technical constraints surrounding its API, as well as challenges relating to “achieving scalability, resiliency, and supportability.”
• Despite the issues involved in efforts to reinvent the CHESS system, an ASX spokesperson said in a statement that the current CHESS infrastructure “remains secure and stable, and is performing well.”
The Australian Securities Exchange (ASX) is set to axe almost 200 contractors who were working on incorporating blockchain technology into its CHESS clearing and settlement system.
The news comes after ASX announced the demise of its seven-year-long project earlier this month, with the company writing down a $170 million pre-tax loss as a result.
Despite the issues involved in efforts to reinvent the CHESS system, an ASX spokesperson said in a statement that the current CHESS infrastructure “remains secure and stable, and is performing well.” So, what went wrong? Let’s take a closer look.
The ASX CHESS (Clearing House Electronic Subregister System) has been operating for around 25 years and manages the settlement of share transactions and records shareholdings across the roughly $3.19 billion of daily trading volume it handles.
In 2014, ASX announced plans to replace CHESS with a new system based on blockchain technology — a move that would have made it the first major financial market in the world to do so. However, after years of development, ASX has now called time on the project, writing down a $170 million pre-tax loss as a result.
An independent audit by consultancy Accenture revealed a myriad of issues impacting the project, including latency and technical constraints surrounding its API, as well as challenges relating to “achieving scalability, resiliency, and supportability.”
In light of these issues, ASX decided to abandon its plans to build a blockchain-based replacement for CHESS and will instead focus on “modernising” the existing system. This will involve implementing some features originally envisaged for the new system, such as real-time settlement. However, ASX has not ruled out revisiting the possibility of using blockchain technology in future projects.
While ASX’s plans to build a blockchain-based replacement for its existing CHESS clearing and settlement system have failed, this does not mean that the end of blockchain’s use in finance is nigh. On the contrary, ASX has said that it remains open to revisiting the possibility of using blockchain technology in future projects. Given the potential benefits of blockchain — including increased efficiency and security — it’s likely that we’ll see more financial institutions experimenting with this exciting new technology in the years to come.
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