Summary
- ASX's dream of becoming the first major exchange for transitioning to blockchain has been delayed once again; international exchanges and banks are closely watching the move.
- The market participants have requested more time for testing and provided extensive feedback on the new system.
- With the increase in the scope of the project, the company plans on continuing the execution.
Australia's bourse operator, ASX, has again deferred its transition to blockchain system until April 2023. The company’s ambitious project - an industrial scale blockchain based clearing system, will replace the Clearing House Electronic Subregister System (CHESS).
With coronavirus pandemic disrupting the market in March, ASX had suggested that there might be delays in the project. The new system launch was initially scheduled for late 2020; later it was moved to April 2021, only to be delayed again to 2023. The ASX took the decision after considering extensive feedback from around 100 organisations and consultations from the market participants.
The ASX stated that the market players were still recovering from the COVID-19 health crisis effects. Therefore, after the discussion with organisations, regulatory agencies and ASX's technology partners, it decided that they needed more time to implement the system robustly. ASX will be making sure that the new blockchain-based clearing system is able to withstand the extreme increases in trading volumes amid the most volatile period of the pandemic.
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Critical feedback from ASX partners:
Many participants asked for more testing before the system is installed. ASX also received requests for adding functions that would reduce the manual processes like electronic corporate action elections.
Now that the decision is taken to launch the system in 2023, ASX will focus on reducing delivery risk along with enhancing the experience for its customers. It will continue to improve project execution as it has increased the scope of the project.
ASX saw unprecedented daily volumes of trading on its platform. The additional trade in early March at the beginning of the pandemic overshadowed the previous records. So, compared to the historical bust, which recorded less than 0.5 million trades, about 3.5 million trades were recorded in that period. The industry now expects such increased trading volumes daily, therefore making it more imperative to have a robust replacement system in place.
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New focus on testing and safe delivery:
ASX now will schedule the CHESS replacement system with increased capacity and scalability. Apart from the increased industry testing priority, ASX will also be given more functionality of the blockchain-based clearing system so that the users and ASX get more time to prepare.
Commenting on the announcement to delay the project, Dominic Stevens, ASX Chief Executive Officer, said that ASX took the critical feedback from industry, regulatory and technology partners during the procedures of this highly ambitious project. Stevens believes that COVID-19 is still impacting not just ASX but also the industry. The process has made it clear to the ASX what its stakeholders are expecting from the new system.
Replacing the existing CHESS is a critical and innovative project for ASX. The change will serve up a long-term benefit to the financial market users in the country. Therefore, Stevens believes that it is ASX's primary responsibility to deliver the new system safely and on time.
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