ASX scraps DLT post-trade project after six years as once heralded initiative leaves behind a trail of failings

Exchange’s CHESS replacement project with Digital Asset comes to an end after significant time and costs are poured in over six years to no avail.

The Australian Securities Exchange’s (ASX) has walked away from its planned distributed ledger technology (DLT) project to replace its legacy clearing and settlement system, ending a six-year journey filled with delays and criticism. 

The project, first announced in 2016, was once seen as the poster child of innovation within the market infrastructure and post-trade space, being the first blockchain project launched amid an era of belief that the technology could revolutionise the plumbing of the financial services industry. 

Instead of completion, the project now ends after six years of delays and uncertainty. ASX said it will write off between AUD$245-255 million, while the Australian Financial Review (AFR) reported it may have to “compensate trading firms that spent at least $100 million on their own upgrades”. 

The delays and issues began rolling in from 2018 with industry participants first requesting delays, and then Covid and an outage delaying matters. 

With testing opened in recent years and multiple live dates given, the project appeared to be moving forward at times. However, in August this year, ASX said the platform was unlikely to go live before 2024 due to commissioning an independent review of the new CHESS application. The aim was to identify necessary actions for ASX to communicate a revised timetable to finish the project.  

“On behalf of ASX, I apologise for the disruption experienced in relation to the CHESS replacement project over a number of years,” ASX chairman Damian Roche said in a statement today. “ASX always endeavours to act in the best interests of the market, and I thank our customers and other stakeholders for their patience and support. Today’s decision has been made by the ASX Limited and Clearing and Settlement Boards, and it has not been made lightly.” 

The exchange said it will now reassess all aspects of the CHESS replacement project following completion of the aforementioned independent review, conducted by Accenture, and its own internal assessment. 

The announcement drew a statement from the Australian Securities and Investments Commission and the Reserve Bank of Australia, where the bodies described the news as a “significant setback to the replacement of critical national infrastructure for Australia’s cash equity markets” 

Reserve Bank governor Philip Lowe added: “The announcement by ASX after many years of investment by both ASX and industry is very disappointing. ASX needs to prioritise developing a new plan to deliver safe and reliable clearing and settlement infrastructure. The Reserve Bank of Australia also expects ASX to maintain the current CHESS so that it continues to operate reliably and support confidence in Australia’s cash equity markets.” 

Digital Asset has moved on to multiple other projects in the financial services space since the ASX announcements including partnerships with Goldman Sachs, Nasdaq and Deutsche Boerse. 

Digital Asset had not responded to a request for comment at the time of publication.