ASX has committed to its ageing CHESS infrastructure until 2032, as it continues to search for a replacement for the increasingly outdated system. Source: rawpixel
The Australian Securities Exchange (ASX) has committed to its Clearing House Electronic Subregister (CHESS) infrastructure until 2032, as it continues to search for a replacement.
The commitment comes after ASX suddenly cancelled its seven-year project to replace CHESS clearing and settlement infrastructure with a custom blockchain-based system last November.
CHESS became fully operational on the exchange in 1998.
The creation of the blockchain system began in early 2015, and was originally scheduled to launch in 2020 before facing five separate delays that ultimately resulted in the project’s demise.
The cancellation resulted in a $250 million write-off from the project.
The costly decision took a significant impact on ASX’s credibility with the Reserve Bank and Australian Securities and Investments Commission, calling the result “unsatisfactory” and “disappointing”.
ASIC ordered ASX to create a report on the capacity and security of the CHESS system, following the fallout of the cancellation of the blockchain system.
The report was released on Monday, in which ASX made the 2032 commitment to CHESS, despite continuing concerns about its capacity, security and need for ongoing maintenance.
ASX chief executive Helen Lofthouse said CHESS has served local investors well and would continue “to operate safely and efficiently”.
“ASX considers that its existing governance, investment, and management arrangements for CHESS are commensurate with its role in providing critical financial market infrastructure,” Lofthouse said via a statement.
“Today’s report provides comprehensive information to demonstrate this. The report is also transparent about the risks, and how these are being managed or mitigated, including through an ongoing road map of maintenance and support.”
ASIC is still to reach its own conclusion.
“The audited special reports will assist ASIC in its assessment of whether any further regulatory action is required,” said ASIC in its own media release after ASX published its report.
“ASIC is prepared to bring to bear a range of regulatory options to ensure that the ASX Group licensees and in particular, ASX Clear and ASX Settlement adhere to the regulators’ expectations and comply with their CS facility licence obligations.”
Loftcraft also noted that a replacement system would be announced before the end of the calendar year.
However, a new system would not be rushed as the “priority is safe rather than quick.”
