ASX has chosen Nasdaq as partner for its botched CHESS project, Senator Deborah O’Neil claims

Labor Senator Deborah O’Neill has surprised the corporate regulator by claiming the ASX has chosen Nasdaq as a partner for its botched CHESS project.

Senator Deborah O'Neill says sources have told her the ASX has chosen Nasdaq for its botched Chess replacement project.

The ASX has chosen New York-based bourse Nasdaq as a partner to replace its botched CHESS clearing replacement project, Labor Senator Deborah O’Neill said, quoting anonymous sources.

To the surprise of the corporate regulator, Senator O’Neill on Tuesday said 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.

“That will not be consistent with our understanding of the situation,” Australian Securities & Investment Commission chair Joe Longo told the hearing.

The bourse operator has told the market and the corporate regulator that it is considering four options to replace its 29-year-old software – which is considered a critical piece of national infrastructure – after plans to update it with blockchain-based technology were put on hold in November.

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.

The four options flagged include buying a new solution from a local or international software company, updating the ageing CHESS system, rebuilding the system from the ground up, or attempting to fix problems identified by an Accenture review into the blockchain-driven project that led to its suspension.

The company has not named the parties that have responded to its requests for proposals for the project, and has said it would announce its final decision in the fourth quarter of the year.

An ASX spokesman said “no firm decision has been made. The RFP process is running in tandem with the other solution design options.” Media representatives from Nasdaq did not respond to emails seeking comment.

ASIC’s market infrastructure team leader Nathan Bourne told the hearing such a decision would need to be made at the board level.

“There may be views internally … but nothing would have gone up to the board at this stage, as far as we are aware,” he said.

Senator O’Neill said she believed her sources were “credible” and said history would be the judge on whether her sources were correct.

“I’m going to trust that your information is more reliable than mine and we shall see what emerges,” she said.

“But I will put on the record that I believe this is a credible source, and it’s indicated to me that the decisions has already been made, and that Nasdaq has been engaged, or is advanced in terms of the entity that’s been chosen,” she said.

To that, Mr Longo said that the Australian bourse were “acutely aware” of their need to restore trust in their decision-making processes and their engagement with stakeholders.

“Grateful for your indications in that direction, and it’s something that we’ll take very seriously,” he said.

Mr Longo also told the hearing the regulator was considering the establishment of a “steering committee” to increase scrutiny of the ASX and its handling of the project.

“We are giving this further consideration,” he said. “Given the importance of the replacement of CHESS to Australia’s financial system, it will be important to ensure any additional governance mechanism is clear about its remit and function and that it doesn’t interfere with the decision making and accountability of ASX over the project.”

“Ultimately, all parties – including ASX – will need to be committed to genuine collaboration and consultation, and to the success of this advisory body.”

Cboe Australia, which competes against the ASX in equity trading and share registry services through Computershare, also appeared at the parliamentary joint committee hearing on Tuesday.

Chief executive Emma Quinn told the hearing ASX’s issues with the project were “symptomatic of an unmotivated integrated market infrastructure provider that has not been held accountable by proper competitive forces and is therefore free to place its interests above all others.”

Originally published as ASX has chosen Nasdaq as partner for its botched CHESS project, Senator Deborah O’Neil claims