The Australian Securities Exchange (ASX) recently announced that it has decided to back off from integrating blockchain into its trading platform for now. ASX which is Australia's biggest stock exchange had earlier planned to use a blockchain system to act as a post-trade settlement system by 2020. This has now been delayed till 2021.
ASX was planning to have a complete revamp of its settlements system with the addition of new blockchain functionality. This would replace the system used by the exchange for the past 25 years, the Clearing House Electronic Subregister System (CHESS). The exchange gathered feedback on its initial timeline of integration and then decided that it was in its best interests to postpone the integration.
The feedback was from 41 of the exchange's stakeholders. This included brokers, payment providers, and others who depend on the system to ensure trades are smooth and trouble-free. Most of them were pretty supportive of the move for a replacement. However, they thought that the ASX was too aggressive in its timeline for replacement and integration of blockchain technology.
In a statement, the ASX said
There was a common view in responses that too much new functionality was being proposed to be implemented in too short a timeframe. It was argued that this would result in increased complexity and risk across project phases and in the implementation timeframe.
The feedback received also pointed out that the industry needed more time to adapt to the changes required by the new blockchain technology. The initial paper released by ASX had 50 new business requirements for those using the exchange and many of the respondents felt that they needed more time to meet those requirements. This was combined with the removal of some features with the replacement of CHESS.
A More Forgiving Timeline
This is why ASX has decided to reassess its original projection of full integration by the fourth quarter of 2020 to March or April of 2021. Additionally, seven of the 50 requirements will be deferred until launch day. The timeline will also give businesses an additional six months for development, testing, and accreditation. The longer timeline will hopefully help with a smoother integration.
ASX has been looking into blockchain technology since 2015. This was in response to trying to streamline and improve the current CHESS system. According to studies, when ASX fully integrates blockchain technology, it would be able to save millions in trading fees. It would also make the exchange the first in the world to integrate this new technology into its trading systems.
