Australian Securities Exchange (ASX) Says Blockchain Settlement System Could Free Billions in Cost
New Distributed Ledger System Could Save Billions, According To ASX Head
The CEO of the Australian Securities Exchange has recently affirmed that the entity could save about $23 billion USD by changing its current settlement system with distributed ledger technology, which could be considerably more efficient.
Dominic Stevens, managing director and CEO of ASX Limited, the exchange operator, has explained that the current Clearing House Electronic Subregister System (CHESS) is not as efficient as the Distributed Ledger Technology (DLT), which could make the transactions faster and also save money.
The Costs Are Very High Right Now
At the current moment, the equity clearing and settlement costs are in the range of $100 million USD and the whole cost of the industry is closer to $23 billion. By using the DLT, there is the possibility of a tremendous increase in the value that this can bring to the customers of the company.
According to the CEO, every day participants of this ecosystem send messages back and forth using the CHESS database and the costs of communication are huge but the process is necessary. Unfortunately, the process is prone to errors and they are hard and expensive to fix when they happen, which adds a lot to the cost of operations.
Another problem that can arise is that the databases of each client can be different, which would mean that there are many versions of the same software being used at the same time to do the same thing. It is a complicated problem, but the DLT can potentially solve most of these issues because of the way that you can use this technology.
With this new system in place, the users would be able to run nodes of the network instead of sending messages. They would be a part of the network instead of having to communicate with too many databases at the same time. This will eliminate the errors, as there will only be a single database for all the participants.
The customers that do not want to set up nodes can still continue to send and receive messages in a similar way that they do today.
ASX is looking to implement its DLT system in the place of the older CHESS system by around the end of 2020 if everything goes according to the plans of the company. This platform will be based on technology created by the Digital Asset Holdings, a partial owner of ASX Limited.
In the future, as the system is put in place, there is the chance that the ASX will also be able to deal with the settlement of bonds and other asset classes, not only equities.