Australian Securities Exchange (ASX) has shelved its seven-year-long project to ramp up the exchange’s CHESS clearing and settlement system using blockchain after an independent audit by Accenture reported issues.
ASX developed CHESS (Clearing House Electronic Subregister System) 25 years ago to process securities trading electronically.
According to ASX, the project incurred a pre-tax loss of roughly $170 million (~$255 million AUD), which the company has written off.
“On behalf of ASX, I apologize for the disruption experienced about the CHESS replacement project over several years,” said Damian Roche, ASX Chairman. “Today’s decision has been made by the ASX Limited and Clearing and Settlement Boards, and it has not been made lightly.”
Today, the share price of ASX Limited ended on the bearish side, down 0.182%, according to data from ASX.
Replacing CHESS with blockchain
Since CHESS is decades old, ASX intended to upgrade the system and started evaluating its replacement options by late 2015.
By January 2016, ASX selected Digital Asset as its technology partner to develop a similar system using blockchain technology, with the project becoming widely known as the “CHESS Replacement.”
The project hit multiple roadblocks, including COVID-19, delaying its launch. In September 2022, Accenture was asked to conduct an independent review of the CHESS Replacement project.
Accenture’s independent report identified “significant challenges with the solution designs and its ability to meet ASX’s requirements.”
Six core issues are indicated in the report, including latency and concurrency. Since ASX processes millions of trade settlements daily, any latency (delay) will affect its operations.
The report also pointed out that only 63% of the project is completed.
According to ASX, “current activities on the project have been paused while ASX revisits the solution design.” The company also said that the current “CHESS remains secure and stable and is performing well.”
“Replacing CHESS is a large and complex undertaking,” said Helen Lofthouse, ASX’s CEO. ”The independent report and our assessment work confirm several significant challenges associated with aspects of the CHESS replacement project.”