ASX blockchain upgrade team in dark over redesign

The architects of the ASX’s blockchain upgrade have revealed a breakdown in relationships and constantly changing objectives were key to the failures of a technology revamp.

The architects of the Australian Securities Exchange’s $250m settlement and clearing operation have revealed a breakdown in relationships and constantly changing objectives were key to the failures of the market operator’s technology revamp.

Appearing before the parliamentary joint committee on corporations and finance on Thursday, Digital Asset, the primary vendor for the ASX’s CHESS replacement system, said the market operator was to blame for the failure of its blockchain-based upgrade.

Digital Asset said attempts by the ASX to cling on to core components of the CHESS system, coupled with an unwillingness by insiders in the market operator to hand over critical data, made it extremely difficult to build a new blockchain-based platform to handle clearing and settlement of trades.

Digital Asset co-founder and head of strategic initiatives Eric Saraniecki said the ASX never supplied the software developer with test data to allow it to gain better insights into the CHESS replacement system.

“It impacted our ability to design something that would meet their full requirements,” he said.

Mr Saraniecki said Digital Asset “tried to find creative solutions to this”.

“We did go as far as to do things like say we would create all the test data but we needed the guidance, what is the right shape?” he said.

Mr Saraniecki said he did not know why the ASX was so reluctant to hand over data, but it led to Digital Asset being forced to create “assumptions in a vacuum”.

Mr Saraniecki said the ASX was also resistant to proposals the new systems be built to handle vastly larger volumes of trading in the future, noting the internal targets were only for a doubling of volume.

The Digital Asset boss said while the relationship with the ASX started well, with the two working together from the market headquarters in Sydney, it quickly deteriorated during the Covid-19 lockdown period.

“As we got deeper into 2020 things became higher friction. That doesn’t at any time mean the line of communication stopped,” Mr Saraniecki said.

In its submission to the committee, Digital Asset took issue with claims the technology company failed to supply a near-complete platform to the ASX.

Digital Asset said a report by consultants Accenture wrongly said the project was only 63 per cent complete.

Instead, Digital Asset said it had completed 90 per cent of the “overall scope” of the transformation project but the late arrival of additional work in January 2022 saw total demands balloon by almost 30 per cent.

Mr Saraniecki said although the ASX was talking publicly about a “big bang” approach to dumping the 29-year-old CHESS platform, it was briefing market participants about plans to preserve elements of the system.

The Digital Asset boss pointed to one incident where the ASX unwound broker functionality, adding millions of dollars in costs.

“I would argue the bigger cost was not that single functionality, but many other things were built downstream of that functionality,” he said.

The ASX said Digital Asset’s evidence was misleading.

It indicated it would review its stake in Digital Asset. It ploughed $15m into the company in 2016.

The ASX suspended its planned blockchain-based replacement program last November

ASX chief executive Helen Lofthouse took the helm of the embattled group in August 2022 from Dominic Stevens.