What a blockchain-powered ASX should mean

The ASX decision to replace CHESS with a blockchain solution will benefit investors as long as all parties are granted fair access, writes Sharesight’s Doug Morris.

On 7 December 2017, the ASX announced it will be replacing its settlement system, known as CHESS, with a “blockchain-inspired technology.”

Those of us investment nerds with an interest in financial plumbing have been keeping a close eye on this for years.

I think this is a smart business move aimed at reducing operating costs and hopefully a step towards more efficient markets. In fact, CHESS was one of the world’s first electronic settlement systems, and the ASX has long been recognised as a leader in technology.

I recall hearing about the ASX in my days at the Chicago Board of Trade (now owned by CME Group), another leader in market tech (bitcoin futures anyone?).

I’ve seen this referred to as a ‘fintech revolution’. The reality is less exciting, but there is a chance for investors to benefit.

The ASX is basically transitioning CHESS to a new database run by a company (Digital Asset) in which they own a $40 million stake. There is no open consensus approach (needed for a truly distributed solution), and access to CHESS data will remain private.

The ASX is a conservative outfit (rightly so) tasked with maintaining the stock market in the interest of the Australian economy – a big job! Their approach to this transition makes sense in that context. Not to mention, they’re a for-profit enterprise.

My guess is the efficiencies gained will be sold as “market speed” and “price discovery” features to institutional trading houses and companies looking to list.

The ASX does, however, have an opportunity in front of them, one that would create better outcomes for millions of investors.

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Source: What a blockchain-powered ASX should mean – InvestorDaily