The Australian Securities Exchange (ASX) said today (Dec. 7) that it would use blockchain to clear and settle trades, becoming the world’s first mainstream equity market to employ the technology behind bitcoin for its core services.
The ASX will replace its decades-old settlement and clearing system known as the Clearing House Electronic Subregister System (CHESS) with blockchain technology to reduce costs for customers by the end of next March, the exchange said.
In January 2016, the ASX announced that it enlisted US-based blockchain startup Digital Asset Holdings to develop a new system for clearing and settling trades. After two years of testing, the decision marks a major milestone in the global race to adopt blockchain, also known as distributed ledger technology, in large-scale financial markets.
“After so much hype surrounding distributed ledger technology, today’s announcement delivers the first meaningful proof that the technology can live up to its potential,” said Digital Asset’s chief executive Blythe Masters, a former JP Morgan banker, in a statement.
The implementation of blockchain in clearing and settling can make transactions quicker, cheaper, and easier when compared to the traditional systems banks use that requires going through a middleman. Goldman Sachs said that the use of blockchain in stock trading could help the industry save $6 billion annually across the globe.
Other prominent exchanges that are experimenting with blockchain include the Nasdaq, the London Stock Exchange, and the Japan Exchange Group.