ASX chief prioritises ‘safe’ completion of troubled CHESS replacement program

ASX chief Helen Lofthouse admits she cannot foresee when the long-delayed clearing and settlement project will be resolved.

ASX chief executive Helen Lofthouse.

ASX chief executive Helen Lofthouse says a “safe” completion of the bourse’s botched CHESS replacement program is her priority but admits she cannot yet predict when the long-delayed clearing and settlement project will be fully resolved.

The Australian bourse is redesigning its planned blockchain-based replacement program – originally mooted in 2016 – after halting it in November last year. It expects to make, and announce, a decision about how to upgrade its 25-year-old clearing and settlement infrastructure in the fourth quarter.

Asked when the exchange expected to have a new system in place and put the whole blunder behind it, Ms Lofthouse said she did not have “a sense of what that timeline is at this point”.

Less than 10 months since starting on the role in August after Dominic Stephens resigned from the position in the midst of delays and doubts about the CHESS replacement project, Ms Lofthouse said: “The priority is safe, rather than quick.”

The exchange was working with stakeholders to decide on the “scope” of the project, and in the meantime it was investing in maintenance of the current CHESS system, while compensating market participants for continuing to work with the exchange on the new system.

“There’s work to do still to figure out what the timeline looks like,” Ms Lofthouse told the Stockbrokers and Investment Advisers Association conference on Tuesday.

“But I’m confident that the current CHESS platform is still working well, and we’ll be able to maintain it and keep it working well for as long as we need to.”

She said the exchange would strive to make sure the right capabilities were in place.

A report on how that system meets market needs and the work the ASX is undertaking to keep it up to date is due to be released “soon” Ms Lofthouse said, but declined to give any further guidance.

She said the bourse was “still on track” to announce the new redesign of the project in the fourth quarter.

The options the ASX is considering for its infrastructure update include attempting to fix problems of the blockchain-driven project that led to its suspension, buying a new solution from a local or international software company, improving its old CHESS system or rebuilding it entirely from the ground up.

Ms Lofthouse said the company had received project bids from “the usual (competitor) suspects” without naming the companies.

The company earlier this month said it was likely it would have to completely dump blockchain as the core technology behind the replacement program in favour of “more conventional” options to deliver the project.

The Australian Securities and Investments Commission earlier this year moved to investigate the company over the project blunder, and Ms Lofthouse said the regulator was “very involved” in the new redesign of the project.

“We operate much of the critical market infrastructure for Australia,” Ms Lofthouse said. “What we do matters and people expect us to do that to a very high standard, and we expect high standards ourselves.”

She said it was important that the bourse “restores trust” and would this month start paying stakeholders who had invested in their expected connections into the new CHESS systems.

ASIC is examining announcements made from October 28, 2020 stating the long-touted blockchain-based CHESS replacement system would “go live” in April 2023 – which at the time meant a 12-month extension.

Mr Stevens at the time pledged the overhaul of the system would meet the expectations of the regulatory agencies that CHESS be replaced as soon as it could be achieved safely and that the new system met the market’s needs.

In November 2020 the ASX experienced an embarrassing and expensive market outage following a major upgrade to its equity trading platform, leading to ASIC and the Reserve Bank implementing an independent review.

It was not until May last year that the ASX conceded that the April 2023 “go-live” target was no longer viable, leading to the departure of Mr Stevens and the then chief financial officer, Gillian Larkins.

Ms Lofthouse announced in November that the botched CHESS overhaul would be suspended and completely redesigned.