ASX forced to delay implementation of blockchain settlement system

ASX is now looking to launch its new post-trade blockchain system in March or April 2021, rather than the end of 2020 as initially planned.

The Australian Securities Exchange (ASX) is to delay the expected go-live date for its blockchain-based post-trade equities platform.

ASX initially targeted the fourth quarter of 2020 to launch the new system, but a consultation on issues with the timeline raised by market participants has led the exchange operator to rethink the implementation date.

The earliest commencement for the post-trade platform has now been pushed back to March or April 2021, providing the ASX with a further six months for user development and testing.

“While there was continued widespread support for delivering new scope on day one, respondents questioned whether the proposed implementation window of Q4 2020 to Q1 2021 was achievable given the significance of the technology change and the range of new scope being introduced,” the consultation said.

Industry-wide testing has been deferred by six months, with the first set of client tests now expected to take place from the Q3 2020 rather than in the Q1 2020 under the new timeline.

The use of blockchain technology on such a wide-scale at the ASX was heralded as a potential turning point for the post-trade industry. The exchange operator announced plans to replace its clearing and settlement platform for equities in December 2017, with the help of blockchain specialist Digital Asset.

ASX and Digital Asset carried out extensive development of distributed ledger technology (DLT) for equity post-trade functions and testing for two years before moving forward with the project.  

“Having completed this work, we believe that using DLT to replace the Clearing House Electronic Sub register System (CHESS) will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets,” said Dominic Stevens, CEO at ASX, upon announcing the project.

ASX’s consultation paper concluded that its focus now turns to providing users with the more detailed information necessary for the exchange operator to further progress planning and development in preparation for the transition to the new system.

“We look forward to working with the industry to deliver and transition to a state-of-the-art-system, which meets the needs of users and ensures that our financial market infrastructure continues to support the development of Australia’s capital markets and economy into the future,” the ASX said.