It's not about CHESS - Part 2 | ASX & CHESS replacement
https://finclear.com.au/
In this special series 'It's not about CHESS', FinClear CEO David Ferrall gives his insights on Australia’s unique market microstructure that will enable rapid uptake of digitised securities, which is a direct result of ASX’s decision almost 30 years ago to promote direct ownership of listed securities via the Holder Identification Number (HIN).
Almost thirty years ago, the ASX made a revolutionary decision that now sets the scene for the next digital revolution – the widespread tokenisation of securities.
CHESS, and in particular the HIN, is why Australia has a globally unique market microstructure.
While it is yet to be implemented, and I recognise not without its’ challenges, the decision ASX made six years ago to upgrade CHESS to a DLT messaging protocol represents a great opportunity that is either vastly misunderstood or ignored.
In many ways this decision is what ‘closes the circle’ of the current CHESS capability and, through smart contract capability, it will transform our current securities ecosystem bringing profound efficiencies and ultimately pricing benefits to retail investors.
More specifically, the upgraded DLT messaging capability will challenge the traditional custodial platform structure and therefore challenge the traditional revenue streams for custody centric platforms.
As example, the bps fees charged on notional value of listed securities - which rise as the securities rise in value even though the platform is not performing any further value-added services – will become a thing of the past. See here for further information on the layers of fees traditional platforms charge.
The real opportunity, however, lies with the DLT itself and its capacity to tokenise securities via smart contracts, host other assets, or even collapse the whole heritage infrastructure (and fee structure) that supports the current listed securities ecosystem.