After an independent audit by Accenture revealed problems, the Australian Securities Exchange (ASX) suspended its seven-year-old initiative to expand the exchange’s CHESS clearing and settlement system using blockchain.
The initiative reportedly resulted in a pre-tax loss of about $170 million (approximately AUD 255 million), which the company has written down, according to ASX.
To handle electronic securities trading, ASX created CHESS (Clearing House Electronic Subregister System) 25 years ago. ASX Chairman Damian Roche publicly apologized for “the disruption experienced over the CHESS replacement project over several years.”
CHESS is about two decades old, hence ASX planned to modernize the system and began looking into possible replacements by late 2015.
In order to create a system similar to CHESS using blockchain technology, ASX chose Digital Asset as its technology partner in January 2016. This project was dubbed “CHESS Replacement.”
The launch of the project was delayed as a result of numerous setbacks, including COVID-19. Accenture was requested to carry out an impartial evaluation of the CHESS Replacement project in September 2022.
Six major problems and substantial obstacles with the solution designs and their capacity to satisfy ASX’s requirements were found by Accenture’s independent report. Concurrency and latency (delay) are other key challenges. Given the daily processing of millions of transaction settlements, any latency will have an impact on ASX’s operations.
According to ASX, project-related activities have been put on hold while the company reviews the solution design. The current CHESS is “secure, stable, and performing well,” the company added.
According to Helen Lofthouse, CEO of ASX, replacing CHESS is a significant and difficult task. He added that a number of severe difficulties related to various areas of the CHESS replacement project are confirmed by the independent Accenture report and their assessment.