BTC Wires: Dominic Stevens, the CEO of the Australian Securities Exchange, who also serves as its Managing Director; announced on Thursday that the organization could potentially save up to $23 billion by attempting to substitute its old settlement system by a distributed ledger. ASX Limited, the entity behind the exchange is an Australian public company controlling the primary securities exchange in the island continent.
Stevens went on to explain how the organization serves to benefit from the use of DLT or distributed ledger technology instead of the presently used Clearing House Electronic Subregister System (CHESS). He said that this substitution would ensure a greater level of efficiency and convenience in transmission of messages and accessing data because DLT would handle both these tasks better than the CHESS does.
Currently, the industry is forced to bear a whopping cost of about $100 million to just carry out equity clearance and settlements. When we add costs of all communications and the miscellaneous expenses that arise in this mammoth industry, the cost rises to almost $23 billion. According to Stevens, a shift to DLT will help them cut costs while serving as a great business enabler for their customers and also encouraging innovation among investors and issuers.
He continued explaining how the industry sees participants exchange messages 24*7 on the CHESS database to ensure proper reconciliation. However, this process is likely to have many errors that cost far too much to fix. Besides, often participants have different databases, essentially meaning that several versions of a software do the same thing at the same time, which is wasteful at best, erroneous at worst. A distributed ledger system can put all these problems to rest. Instead of sending messages, the DLT system will allow participants to run nodes. They will be able to connect to a central database as a whole in place of having several inchoate databases. This will help to cut down on the number of errors, although customers who are not comfortable with the new system can opt for continuing with the existing one.
Earlier in 2018, ASX had announced that is was looking for feedback for its plan to replace CHESS with DLT and the recent announcement has confirmed that the change is indeed underway and is expected to be rolled out entirely by 2020-end. The platform has its hand on the technology developed by the partly ASX-owned Digital Asset Holdings. In the coming days, the technology is expected to move beyond just equities and handle bond settlements and alternative classes of assets as well.