The Australian Securities Exchange (ASX) has released a public consultation seeking feedback on its proposed two-stage approach for the delivery of its replacement for the Clearing House Electronic Subregister System (CHESS). The consultation comes after years of setbacks in the development of a new DLT platform, prompting a reassessment of the project which seems to have led to abandoning DLT altogether.
Commenting on this period, ASX mentions in the consultation: “The project initially focused on building a replacement system based on distributed ledger technology (DLT). After pausing the project in November 2022, we reassessed a number of solution designs and potential technologies.” In November 2023, ASX announced that it had chosen BaNCS for Market Infrastructure (BaNCS MI) from technology provider Tata Consultancy Services (TCS) as a product based solution to replace CHESS. The Australian exchange seems to be moving away from DLT with this change, as BaNCS MI offers “connectivity with distributed ledger and other emerging technologies, creating a foundation for new services driven by market demand”.
ASX has put forward an updated plan, focusing on introducing clearing services in the first phase, with settlement and subregister services scheduled for a later stage. The indicative timeframe for the first release is set for 2026, with potential implementation of the second release estimated for 2028 or 2029.
DLT Fiasco
Initially announced in 2015, the CHESS replacement project aimed to leverage a DLT platform, developed by US software firm Digital Asset, as a modern alternative to existing post-trade systems. However, challenges arose during the development phase, leading to delays and increased scrutiny.
An independent review conducted by Accenture in 2022 revealed communication flaws between ASX and Digital Asset and accountability gaps, contributing to execution challenges and misaligned expectations. Following the review, the project was declared worthless with a write-off of about 250 million Australian dollars.
Now, ASX is seeking input from stakeholders on its updated approach. The consultation period will run until 24 April, with ASX expected to provide a response paper in June. A second consultation paper is anticipated in the third quarter of 2024.
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