ASX looks to unleash blockchain technology on the Australian stock market

  ASX stock market blockchain CHESS distributed ledger technology DLT Dominic Stevens
CEO and CEO ASX Dominic Stevens believes that the use of blockchain technology to replace CHESS enable the development of new services and reduce costs by putting at the same time Australia is at the forefront of innovation in the financial markets.

The Blockchain technology has hit the Australian coast well in recent years, with the Australian stock exchange destined to become the world's first blockchain / DLD (distributed ledger technology) allowed the stock exchange.

More than a dozen companies focused on blockchain have already entered the public market via ASX, with the latest blockchain adopting none other than ASX Limited (ASX: ASX

Small Caps reported for the first time the intention of ASX to enter blockchain in December of last year, with Over the past eight months, ASX has created favorable market conditions to prepare its innovative technology which has yet to be implemented by any other stock exchange, including US and European giants such as the NYSE, LSE and Euronext.

However, the US NASDAQ, the NYSE, the Tokyo Stock Exchange, the Deutsche Bourse and India & # 39; s Securities Exchange Boards have taken the first steps in the blockchain world by setting up a first round of negotiations to test the technology, or, have appointed commissions to study the feasibility of blockchain use in the future.

see which blockchain technology is capable, just think of funding, supply chain management, record keeping and cryptocurrencies to name just a few industries that have been strengthened by its introduction in recent years [19659003] Blockchain is not just a means to supporting crypto-currencies such as Bitcoin and Ethereum – technology has the potential to revolutionize any market that touches es, simplify the way in which financial data is stored and transmitted between market participants and, last but not least, ensure stability of trading venues struggling to cope with fluctuations in market activity.

ASX to the rescue?

The annual conference on the financial results of ASX Ltd this week, the managing director and the current chief executive officer Dominic Stevens said that ASX is "freeing safely the source of information on the truth in real time "so that it can be used by participants and other providers to build new services across the value chain.

As part of a concerted move, ASX says it is implementing DLT that will reduce the risk, costs and complexity of the Australian stock market, preparing it for the innovation of services at the forefront, and ultimately, freeing up service innovation through an ecosystem of interconnected users.

If that were not enough, ASX says its chain-block DLT technology will eliminate the need for full-scale rejoining, allowing marketers to get accurate market information in real time "without having to ask l & # 39; ASX ".

Financial Results Pave the Way to Blockchain Shift

In the past financial year, ASX has produced robust operating performance with revenue rising in all four of its distinct activities. The results indicate that ASX continues its multi-year revenue series on an annual basis, EBITDA and profit increases.

ASX saw its annual operating revenue grow by 7.7% ($ 58.6 million) to $ 822.7 million. To a larger extent, its EBITDA rose 7.5% ($ 44 million) to $ 627 million.

The inflated numbers were partially helped by revenue from directory and broadcasting services up 14.5%, with increasing capital increases of a healthy 46% compared to last year, including a total of 81.7 billions of dollars raised by the listed companies ASX.

According to Stevens, the results of this year were the company's best growth figures in eight years, with increases that are wide across the company and built against the background of a subdued stock market. which saw a limited growth in demand for trading, clearing and settlement services.

"We believe that the financial services industry is in a period of great change and many aspects of this change are driven by forces that help increase demand for existing ASX services," said Stevens.

"In addition, ASX is investing in infrastructure that will support products and services that will be valuable to our tomers in the future, which sees a number of exciting opportunities for strategic growth emerge."

The ASX plans to raise capital expenditures from $ 54 million in 2018 to approximately $ 75 million in the 2019 financial year, which includes costs for the development of the DLT.

From financial results to technical performance

ASX hopes to complete its ambitious blockchain plans by introducing a replacement to its current CHESS clearing system – a new blockchain system called "CHESS based on DLT ".

The replacement system has been called "a key piece of technology", not just for ASX as a company and a trading venue, but for the entire Australian emission and investment community.

According to ASX, he worked on his DLT system for almost three years as part of an extensive work program that now sees the light at the end of the tunnel. Once completed, the new CHESS system will become the first industrial-scale application of DLT in critical financial market infrastructures anywhere in the world.

It is hoped that its multifaceted movement towards blockchain and DLT will provide significant value to consumers, investors and companies and should serve as a "great business enabler for our customers and an important innovation factor for issuers and investors" according to Stevens.

In addition to CHESS's update, ASX is also reinvigorating its 20-year-old secondary data center.

ASX intends to upgrade this center to a new, third-party, state-of-the-art facility that will allow the exploitation of the most modern and sophisticated features that already exist in its main structure.

Why the transition from CHESS?

The first improvement over the old CHESS system comes in the form of simplified data processing.

In the current CHESS system, participan ts send messages back and forth to the CHESS database to make sure that their operations are reconciled appropriately

This process is repeated thousands of times a day, it can often be subject to errors and, understandably, it becomes expensive to maintain.

 ASX blockchain database technology DLT CHESS

One of the main obstacles in the current system is that the databases used by the various participants often vary, meaning that there are multiple versions of software that duplicate records and make reconciliation an infinite battle between clients and clearer ones.

With DLT implemented, instead of sending multiple message streams to reconcile a large number of available databases, participants connect through "nodes" that are connected via the distributed ledger of the network and form a perfect chain of title that does not it can be changed, according to Mr. Stevens.

After evaluating customer feedback, ASX states that it currently "finalizes and work plan" for CHESS based on DLT to go online between September 2020 and March 2021.

The date is even more than two years out, but it means that the Australian capital markets are set on a path towards the digitalization of the market in the form of advanced computing being able to provide previously impossible functions such as real-time reconciliation, instant trade regulation and lower commission costs for Australian investors.

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