The world will look on "carefully" as the ASX becomes the first major stock exchange to implement distributed ledger technology (DLT) across its trading platform, says deputy chief executive Peter Hiom.
In announcing it will replace its trades settlement system, CHESS, with DLT provided by fintech Digital Asset, Hiom said the bourse will be the first to use a private and regulated network of this kind.
DLT software will settle and clear equity trades across a network where participants are known or 'permissioned' to have access and must comply with the exchange's ongoing and enforceable obligations.
ASX managing director and chief executive Dominic Stevens told this morning's briefing that participants will be able to connect in a similar way they do now, with the option to use a new messaging system or directly interact with the distributed ledger.
Stevens said the ASX has been examining DLT for almost 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.
DLT brings tremendous value and will provide a standardised structure to synchronise the different systems or databases participants use, as well as instantly eliminate reconciliation issues, he said, adding blockchain technology is not as a bigger risk others may perceive it as.
He added not all participants will migrate at once as a transition period and its full functionality is to be finalised in consultation with stakeholders; feedback is due by the end of March 2018.
Treasurer Scott Morrison said the roll out is consistent with the Government's agenda to put Australia at the forefront of financial technology and efficient financial markets.
"We support the ASX's commitment to designing a system that does not raise barriers to access for non-affiliated market operators and clearing and settlement facilities," he said in a statement.