Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
ASX progresses blockchain replacement for CHESS
While pushing back its deadline a bit, the ASX has made great progress towards replacing its old CHESS transactions administration system with the new distributed ledger technology, colloquially known as ‘blockchain’. The ASX will be the first stock exchange in the world to embrace the new technology.
In a paper on its website the ASX has responded to 41 written submissions from big stakeholders, mainly fund managers, to its proposed shift. Overall, the submissions were supportive of the move.
The primary securities exchange announced in December 2017 that it would replace CHESS, the software used for the clearing and settlement of equity transactions with a distributed ledger technology solution. The new system will offer quicker dividend payments and quicker corporate action notifications. It embraces, in a more efficient manner, the advantages of digital technology for the investment administration process.
The decision follows almost three years of testing and building enterprise-grade blockchain software with US distributed ledger company Digital Asset, of which the ASX, along with several big global banks, has become a shareholder.
The replacement of CHESS onto the new software – which retains some of the old system – has now been pushed back from the fourth quarter of 2020 March or April 2021 for commencement. As ASX points out, distributed ledger technology is not actually revolutionary. It enhances what is currently used.
An additional six months will be provided for user development and testing and extend mandatory accreditation by six months, the ASX said last week..
Implementation of seven ‘scope items’ will be delayed to post commencement and one requirement will be brought forward to the ‘Day 1’ commencement date in response to feedback.
The main item being brought forward is the linking of bilateral settlements and the items to be deferred are certain settlement and pre-settlement functions.
“We do not underestimate the challenge to replace CHESS and transition the market to the new system. ASX’s dedicated CHESS replacement project and technical account management teams will support users through this critical industry-wide change program,” said the ASX in its paper.
“There will continue to be significant collaboration with stakeholders over the entire project. ASX will ensure that further technical information, support and systems environments that customers and their vendors will need to connect to the new system are provided with sufficient lead times.”
The switchover to the new system will take place of a single weekend which will be announced by the ASX closer to the time.
“ASX remains of the view – informed by previous experience transitioning critical market infrastructure systems –Â that the single cut-over weekend is the most appropriate solution and is lower risk than other alternatives such as running multiple systems in parallel.”
– G.B.
