(This version of the story corrects paragraph 7 to show ASX plans releasing timetable for transition to new system in March 2018, not make it operational in March 2018)
By Susan Mathew and Anna Irrera
(Reuters) - Australia's ASX Ltd said on Thursday it would replace its registry, settlement and clearing system with blockchain technology to cut costs for customers.
The decision to replace the Clearing House Electronic Subregister System (CHESS) on Australia's main bourse follows two years of testing of distributed ledger technology, also known as blockchain.
"We believe that using DLT to replace CHESS will enable our customers to develop new services and reduce their costs," ASX Managing Director and CEO Dominic Stevens said.
The move will make the Australian Securities Exchange one of the biggest mainstream financial markets to use the relatively new ledger system, best known as the technology underpinning the bitcoin crypto-currency.
Blockchain is a shared, verifiable and permanent record of data that is maintained by a network of computers.
Banks and other large financial institutions have ramped up their investments in the technology over the past few years, hoping it can simplify and cut the cost of back-office processes.
ASX expects to propose a timetable in March 2018 for transition to the new system, with a final date to be determined in consultation with market participants.
The system would be designed without access barriers to non-affiliated market operators and clearing and settlement facilities. It also would give ASX customers choice over how they use its post-trade services.
ASX bought a minority stake in U.S. blockchain developer Digital Asset through a A$14.9 million ($11.27 million) investment in January last year, to design a new post-trade solution for the Australian equity market.
The market operator's decision is a win for the young technology company led by Blythe Masters, a former senior JPMorgan banker.
Founded in 2014, Digital Asset has raised more than $115 million from large firms including ASX, Goldman Sachs Group Inc , JPMorgan Chase & Co , CME Group Inc , Deutsche Boerse (DB1Gn.DE) and Citigroup (C.N). "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," Masters, Digital Asset's chief executive, said in a statement.
ASX shares gained as much as 0.88 percent by 0039 GMT, while the index was up 0.5 percent.
(Reporting by Susan Mathew in Bengaluru; Additional reporting by Anna Irrera in New York; Editing by Stephen Coates)