Cboe backs Nasdaq involvement with CHESS replacement as ASX says no decision has been made

Cboe said Nasdaq would be a ‘solid’ choice for ASX in replacing its CHESS system while the operator shut down claims it had chosen its provider.

The sharemarket operator has shut down comments made by Labor senator Deborah O’Neill that ASX had chosen New York-based Nasdaq as a partner in its CHESS replacement system, saying “no decision has been taken”.

ASX told the chair of the Parliamentary Joint Committee on Corporations and Financial Services that it was still determining the solution for the replacement of CHESS from the range of possible technologies and partners being considered.

The owner of the Australian Securities Exchange said that it was exploring four solutions before the final call is made late this year including fixing the CHESS replacement or building a custom or product-based solution.

Rival operator Cboe Australia has welcomed Nasdaq’s possible involvement with ASX. Picture: Getty Images

The prospect of Nasdaq providing the technology for ASX’s CHESS replacement system has the backing of the country’s second largest exchange – Cboe Australia.

US-based Cboe Global Markets chairman and chief executive Ed Tilly said at a media event in Sydney on Thursday that Nasdaq would be a very “solid” pick for ASX.

“Nasdaq will deliver (for ASX) and it is an incredible global exchange in a box that will meet their tech needs,” he said.

“We compete them right around the world and they are very solid and good at what they do.”

Cboe Australia competes against ASX and offers investors access to exchanged traded funds and other managed funds. The former Chi-X index replaced its own technology earlier this year to allow for better performance and capacity to scale up in the future.

ASX said it had not decided what it will do in regards to its CHESS replacement, after Labor Senator Deborah O’Neill said earlier this week that the sharemarket operator would partner with Nasdaq. Picture: NCA NewsWire / Martin Ollman

Cboe Australia chief executive Emma Quinn said it was less about the vendor that ASX picked and more about a platform that was open and allowed for competition.

“This is about growing the pie and making the financial market better for Australia. Whether we enter into the clearing space down the track or not, it is better for Australia full stop if there is competition,” she said.

“That is why we are advocating for open architecture of the CHESS system to allow that.”

On Tuesday, Senator O’Neill surprised the corporate regulator by saying that she had two independent sources indicating “that there has already been a decision about who the technical partner for the ASX moving forward would be,” she told a parliamentary hearing.

Ms Quinn, who also appeared at the parliamentary joint committee hearing on Tuesday, added that the market was crying out for more competition.

“More competition will benefit everyone right down to the investor, by bringing more products into the market place and diversifying people’s portfolios,” she said. “It is not about taking listings from the ASX.”

The 36-year-old ASX has already taken a $250m write down over the unsuccessful project and has told the market it would cut dividends to use the funds to invest in ongoing regulatory and technology modernisation costs.