ASX to host CHESS replacement roundtable

The Australian Securities Exchange (ASX) has agreed to host a roundtable at the request of the Australian Securities and Investments Commission (ASIC) to re-engage industry on its troubled CHESS replacement project.

ASIC said it’s proposing the group be independently chaired and “advise on significant strategic clearing and settlement issues relating to cash equities trading in Australian markets with a focus on CHESS replacement.”

The roundtable be hosted at the start of August and chaired by ASIC chair Joe Longo as plans are made in how to best move forward with the core replacement.

Longo will be joined by ASIC commissioner Danielle Press and the deputy governor of the Reserve Bank of Australia, Michele Bullock alongside “a small group of recognised industry leaders”.

ASIC’s request comes as the troubled CHESS replacement program undergoes a redesign, after an earlier blockchain-based replacement was discontinued due to “significant technology, governance and delivery challenges”.

While the exchange hasn’t given up on blockchain, ASIC said in March it would investigate the CHESS program for any “suspected contraventions of the ASIC Act 2001 and the Corporations Act 2001 “.

The change of direction on the project, at a late stage of implementation, caused the industry to incur considerable costs, and damaged trust.

On Friday, Longo said the “ASX’s effective engagement with industry is an urgent issue that must be resolved in order for the overall project to get back on track”.  

“The establishment of an appropriate stakeholder advisory group for cash equity clearing and settlement matters is critical to the restoration of confidence in ASX’s decision-making and culture," he said.

ASIC stated 12 industry leaders have been invited to the roundtable from different stakeholder sectors and backgrounds.

“It is vital that ASX gets its stakeholder engagement on the CHESS replacement right.

"Ultimately all parties, including ASX, will need to be committed to genuine collaboration and consultation and to the success of an advisory body.

“The industry now has the opportunity to be part of that solution, and it is in the national interest to do so,” Longo said.

ASX said as work on the new solution design makes headway, “the project will begin shifting into a detailed design and implementation planning phase which is expected to draw increased levels of stakeholder engagement.” [pdf]

“The proposed Cash Equities Clearing and Settlement Advisory Group is intended to provide strategic advice to ASX Clear and ASX Settlement on CHESS replacement and key matters such as industry impacts and benefits of moving to T+1 settlement," it said.

“The existing ASX business committee and the new advisory group will provide a solid foundation for market engagement at multiple levels.”

ASX will also host the next business committee meeting on July 19.

ASX managing director and CEO Helen Lofthouse echoed previous comments, stating the exchange is “committed to increasing transparency and enhancing stakeholder engagement.”

“I’ve previously stated ASX needs to continue to take steps to rebuild confidence and restore trust, and later this month," she said.

"We expect to release an expert report on our intra-group conflict management arrangements.

“We appreciate the facilitation provided by ASIC to support the establishment of the proposed stakeholder advisory group and look forward to further collaborating with senior industry stakeholders to work constructively and deliver quality outcomes for the whole market.” 

While the core replacement is contemplated, the exchange needs to keep its current system capable of meeting trading volume demands.

ASX plans to “stress test” its existing core trading system this December to see how capable it is of meeting projected 2032 trading volumes.

It also recently made an internal hire, with Tim Whiteley stepping into the re-established CIO role. ASX shaped out the standalone role this past March to create “a single point of senior executive focus and accountability for delivering ASX’s enterprise-wide technology renewal program."