The Accenture report that led the Australian Securities Exchange (ASX) to abandon a blockchain-based foundation for its CHESS core replacement calls into question the future of similar settlement use.
The combination of distributed ledger technology (DLT) and smart contracts hampered the performance and scalability of the CHESS replacement, the report said.
“The review highlighted a need for greater consideration of how the business flows interact with the application, the ledger and how the current design contributes to challenges in achieving scalability, robustness and supportability,” the review states.
Accenture singled out DLT as introducing latency “worsened by multiple layers … in the current architecture”.
ASX’s role as the “final arbiter” of trade outcomes minimized “many of the benefits of a DLT architecture”, the report said, and the ledger’s API would have needed “changes in the quality of service to enable throttling and control of the actions of participants “.
The CHESS replacement’s architecture also presented scalability challenges; and “achieving scalability with concurrency is complex and requires appropriate design”.
The report also noted that the CHESS replacement software fails more than 100,000 transactions (the report did not specify in what time period) “due to data expiring”.
The report examined the smart contract language (Daml) and distributed ledger software (VMWare’s VMBC ledger) in the CHESS replacement project.
Regarding Daml, the review said “the current design and implementation in the CHESS replacement application does not take full advantage of the language’s strengths”, adding that it provides “little value” to participants processing business logic on the ledger.
“Daml may not be the most appropriate solution for all business processes, logic and data,” Accenture said in the report.
While VMBC offered features such as “resiliency, immutability and provability of data”, the CHESS use case focused on resiliency alone, “which adds unnecessary complexity to the solution, for example consensus contributes to round-trip latency.”
“VMware ledgers coming to consensus via a ‘slow lane’ can impact latency and processing times,” the report added.
Recommendations
Accenture said the DLT strategy should be reassessed or updated “to determine long-term use”, adding that the ASX needs to “understand DLT use in the technology stack”, which includes third-party applications, “day-2 CHESS functions”, and the division between ASX’s Synfini1 and CHESS.
The exchange must also consider whether it needs to consider or reconsider changing its business processes “to leverage the benefits of a smart contract language and DLT,” where those workflows “conflict with the technology stack,” Accenture said.
The CHESS replacement’s design choices need to be reassessed “with an eye to simplification”, Accenture said, and ASX should “review architecture layers and consider value versus complexity” in DLT, Daml, application design and topology.
ASX still ‘open minded’ on redesign
The ASX said this morning it remains “open-minded” to potential solution designs as it halts the replacement of the CHESS core system to review the program.
During a joint investor and analyst briefing, ASX managing director and chief executive Helen Lofthouse said the exchange “will absolutely be open about what the right solution is”.
“I would say that we will go and look at the solution with a very open mind. It is our high standards of scalability, secure implementation, ongoing supportability, that drive this decision, but will certainly be open about what the right solution is, she said.
“I believe that distributed ledger technology has a place and can play an important role in the financial markets.
“But we will be very open about how we think about what the solution options are, and our focus is really on providing the best clearing and settlement solution that we can.
“We just need to be broad-minded and very open in our thought process as we figure out what it is,” Lofthouse said.
She said that in terms of options available, “there really isn’t an off-the-shelf solution available that meets the needs of the Australian market” and that the ASX “needs to be very comprehensive and thoughtful in how we look at the options”.
“Our regulators have very high expectations of us. It is entirely appropriate and we will continue to work closely with them.
Lofthouse apologized for “the impact of the ongoing delays to this project” as the findings showed “key issues are mainly related to the application software readiness, the complexity of the integrated solution design and in project management.”
