The Australian Securities Exchange (ASX), will move the settlement and clearing of the $2 trillion Australian cash equities market onto blockchain-inspired technology being developed by a NY start-up.
Stevens said the ASX has been examining DLT for nearly two-and-a-half years, including the last two years with Digital Asset in order to understand its potential application, and has used independent third-party security to review the new technology.
Today's announcement follows a successful build of digital ledger blockchain technology by ASX partner Digital Asset Holdings LLC, a blockchain infrastructure developer, for core equity clearing and settlement functions. The system, which was developed by Digital Asset (DA), will replace the Clearing House Electronic Subregister System (CHESS).
Australia's main stock exchange just announced one of the finance industry's biggest bets yet on blockchain.
"We believe that using DLT to replace 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 ASX managing director and CEO Dominic Stevens.
"We're the first exchange to consider taking this step", ASX deputy chief executive officer Peter Hiom said on a media conference call. It also conducted stakeholder consultations and briefing with regulators.
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Transactions of the cryptocurrency Bitcoin are tracked used blockchain.
The new system will operate on a secure private network where participants are known, have permission to access, and must comply with ongoing and enforceable obligations.
The ASX said it would release details on how the system would work and when it might be launched in March next year.
While delivering its 2017 financial results in August, the exchange said its new post-trade solution to replace the CHESS platform was still undergoing testing, with the software on track for assessment in December by a third party. ASX has become the world's most profitable major stock exchange this year, with a profit margin of 77%, ahead of the Hong Kong Exchange with a forecasted 71%.
The ASX also announced that it will exercise its right to participate in DA's recent Series B fundraising, subscribing for US$3.5 million in convertible notes.
"The testing confirms ASX's confidence in the functional, capacity, security, and resilience capabilities of [Digital Asset's] application of DLT to meet the needs of Australia's financial marketplace and maintain the highest regulatory and operational standards", the statement explains.