The ASX Analogy

In part three of the five part Forming our Future Series, we discuss how PEXA and emerging ELNOs provide the property market with the revolutionary change the ASX and CHESS provided for equity markets.

Real estate has traditionally been traded differently to other asset classes. The reasons for this are principally historical reflecting the importance of land ownership, the specificity and uniqueness of real property (such as location, built structures, market value and associated property rights) and the illiquid nature of the underlying asset.

Similar to what the ASX and CHESS has done for the exchange of shares (clearing and settlement), PEXA removes the manual processes and paperwork associated with the exchange of property by allowing land registries, financial institutions and practitioners to transact together online. This includes providing an electronic environment to:
  • Lodge the land title dealing documents and related instruments needed to register changes in property ownership and interests.
  • Allow the different and accredited parties involved in the transaction to view and complete the documents to conclude the property exchange or transaction.
  • Allow for the electronic settlement of all financial transactions at a nominated date including settlement monies, duties, taxes and any disbursements.
  • Lodge electronically land title instruments for registration with the relevant state or territory land registry for electronic processing.

The evolution of PEXA and the e-conveyancing ecosystem will likely follow the same path as other electronic exchanges, clearing and settlement models such as the ASX/CHESS and Computershare.

CHESS is operated by the ASX Settlement Corporation (ASX Settlement), a wholly owned subsidiary of the ASX, under license from ASIC. ASX Settlement as the operator authorizes participants such as brokers, custodians, and institutional investors, settlement agents and so on to access CHESS and settle trades made by themselves or on behalf of their clients.

In addition to performing settlement, CHESS electronically registers the title (ownership) of shares on its sub-register. This registration is secure and is an efficient means for holders to register title of their shares if they intend to trade them.

The relationships with the RBA and registries are completely consistent with those that will exist with PEXA. In fact the network of participants and practitioners that CHESS brings together is exactly the same as PEXA aspires to, but for property exchange.

In summary, CHESS performs two major functions for the ASX:
  • It facilitates the settlement and clearing of trades in shares; and
  • It provides an electronic sub register for shares in ASX listed companies.

In part four of the Forming our Future Series, we explore the natural evolution of e-conveyancing to a national commercial model for Australian land registries.