In the recently published “Full-Year 2016 Results Presentation”, the Australian Securities Exchange (ASX) has stated that it has completed the initial phase of a distributed ledger-based prototype for replacement for CHESS, its clearing and settlement system.

The “working solution for subset of use cases” has been developed in collaboration with blockchain startup Digital Asset Holdings. The ASX said that it engaged with regulators and stakeholders on the concept and also ensured that the prototype met performance, security and scalability thresholds.

It also outlined the next development phase which involves building an industrial strength platform that could replace CHESS; engaging with customers and other stakeholders; and decision on CHESS replacement in FY18.

During the full year results presentation, ASX CEO Dominic Stevens has that the work on the next phase has already begun, ComputerWorld reported.

“We’re in the midst of a major transformation,” Stevens said. “Specifically we’re replacing or upgrading our trading, monitoring, risk and clearing systems, exploring post-trade innovation through the use of distributed ledger technology, [and] improving connectivity for our customers, here and abroad.”

Deputy CEO Peter Hiom highlighted the key differences between the “permissioned disturbed ledger technology” and the public blockchains, saying:

“The main difference I want to highlight is public blockchains are operated largely in unregulated marketplaces where anyone can join and access those markets anonymously via a public, or unpermissioned, network,” he said. “Network security is public to scrutiny and if compromised it could allow someone to anonymously and unilaterally transfer cryptocurrency on the public network. This is clearly unacceptable in the types of highly regulated markets within which the ASX operates.”

Hiom added that the ASX didn’t seek to change the existing regulatory framework it operates in.

The document also stated that the ASX has increased investment in Digital Asset Holdings on 30 June 2016 to 8.5%, with total investment now amounting to US$17.4 million. It further said that the firm has spent AUD$50.2m on technology including its work on distributed ledger technology.