The Australian Securities Exchange (ASX) is contemplating to replace its Clearing House Electronic Subregister System (CHESS) clearing and settlement system with blockchain technology.
The Managing Director of Australian Securities Exchange, Elmer Funke Kupper stated, “We have set up our equities post- trade systems as a separate business headed by Cliff Richards, who has just joined us from NAB trade.
We are engaging with firms domestically and overseas about the new technologies that are available to get cost out of the equity market.
We are looking at what we can do to bring end- to- end efficiencies, and we have people looking very closely at blockchain to see if we can create efficiencies for our clients, investors and companies.”
Kupper explained that the blockchain will help decrease the costs, save time and simplify the clearing and settlement of trades.
He further stated “We see CHESS replacement as a one- in- 20 year opportunity.
We’re thinking about whether there are smarter ways to do things – to remove a lot of administrative costs and reconciliation costs from the back end of investment banking and broking, and this is where blockchain could be potentially quite helpful.”
The blockchain is an underlying technology that is a decentralized public ledger of debits and credits which is not owned by any company or individual and is directly controlled by the user.
According to Kupper, blockchain will be able to increase the resolutions of major disruptions such as the recent collapse of the broker BBY. Since the global financial crisis, it was the first collapse on an Australian stockbroking firm.
Kupper explained, ‘’We have had real issues with BBY in terms of transferring clients from BBY to other brokers.
The way we record people’s investments using [holder identification numbers] has been designed 20 years ago. We think there is a better way that puts the power in the hands of clients.
Imagine if you could use you tax file number or a derivation of your TFN to record your investments in a version of CHESS. We can then pre- populate everybody’s tax return.
Once you can do that we can record centrally whether someone is a sophisticated investor as opposed to having to prove it time and time again.”