ASX halts its blockchain-based core replacement

The Australian Securities Exchange (ASX) will no longer go ahead with using a blockchain-based system to underpin its CHESS core replacement system.

The ASX said it will reassess all aspects of the CHESS replacement project following completion of an independent review, conducted by Accenture, and its own internal assessment.

The independent report identified significant challenges with the solution design and its ability to meet ASX’s requirements.

According to the ASX current activities on the project have been paused while ASX revisits the solution design. Its current CHESS remains secure and stable, and is performing well. ASX will continue to invest in its capacity and resilience.

The review by Accenture was called in August after go-live for the blockchain-based CHESS replacement was delayed by a further 18 months to late 2024.

CHESS stands for clearing house electronic subregister system. It underpins all trades and settlements on the exchange.

The CHESS replacement capitalised software will be derecognised in light of the solution uncertainty, resulting in a charge of $245-255 million pre-tax ($172-179 million after tax) in 1H23. This will have no impact on dividends, the ASX claimed.

Damian Roche, chairman at the ASX said, “We began this project with the latest information available at that time, determined to deliver the Australian market a post-trade solution that balanced innovation and state-of-the-art technology with safety and reliability.

“However, after further review, including consideration of the findings in the independent report, we have concluded that the path we were on will not meet ASX’s and the market’s high standards. There are significant technology, governance and delivery challenges that must be addressed.”

Roche apologised for the disruption experienced “in relation to the CHESS replacement project”.

“ASX always endeavours to act in the best interests of the market, and I thank our customers and other stakeholders for their patience and support. Today’s decision has been made by the ASX Limited and Clearing and Settlement Boards, and it has not been made lightly.

“ASX provides critical market infrastructure. What we do matters. We must do it right and we will. Importantly, our current CHESS system is performing well and investment in it will continue, giving us flexibility to reassess the various pathways for its ultimate replacement,” he added.

A project director with extensive technology transformation experience has been appointed for the next phase of the CHESS replacement project.

The ASX said it remains committed to providing the best long-term clearing and settlement solution for the Australian financial market.