The CHESS clearing and settlement system at the Australian Securities Exchange (ASX) will be losing around 200 contractors due to the impending implementation of blockchain technology.
The announcement comes after ASX disclosed earlier this month that it was abandoning a seven-year initiative, resulting in a pre-tax loss of $170 million for the business.
With a daily trading volume of over $3.19 billion, the ASX CHESS (Clearing House Electronic Subregister System) has been in operation for 25 years, handling the settlement of share transactions and recording shareholdings.
By offering easier access to the register of holders for those issuing securities, the business hoped the blockchain update would allow issuers and end investors “more control over, and higher confidence in” the exchange’s market activities.
Accenture, a consulting firm, conducted an independent audit of the project and found a wide range of problems, such as API latency and technological limitations, as well as issues with “achieving scalability, robustness, and supportability.”
Since its inception in 2017, the blockchain project has been plagued by setbacks, with the latest one delaying its completion until late 2024.
In spite of the fact that the decision would have affected the vast majority of the external staff working on the project, ASX told Reuters that it had retained a subset of the third-party contractors working on the project. These individuals will either participate in a formal review of the project or transition to other roles within the company.
There were up to 300 people working on the project at once, with an estimated 75 percent being freelancers.
An ASX representative stated in a statement that the current CHESS infrastructure “remains secure and stable and is working well” despite the challenges associated with the CHESS system’s reinvention.
Large companies’ embrace of blockchain technology has been inconsistent.
The decision by ASX is not the only significant blockchain initiative to be abandoned in recent weeks.
TradeLens, an IBM and Maersk initiative to digitize the world’s shipping industry, will end in late 2023, the companies revealed.
Although the Australian stock exchange may have abandoned its blockchain ambitions, for the time being, similar technology may soon be piloted by other stock exchanges across the world.
Distributed ledger technology (DLT) trials for stock and bond trading on digital ledgers were announced in September by the European Securities and Markets Agency (ESMA) (DLT).
