ASX admits misleading statement about tech upgrade project progress, settles ASIC legal proceedings

The Australian stock exchange operator has admitted issuing a misleading statement about the status of a critical technology project, settling civil legal proceedings brought by the corporate watchdog. The Australian Securities and Investments Commission launched the action against ASX Ltd in August 2024 after it stated in February 2022 that its Clearing House Electronic Sub-register System (CHESS) upgrade was “progressing well”. But it was not on ASX Ltd’s “critical path” to go live in April 2023 as planned, and had for months been internally classified “red’, indicating significant unresolved issues or risks. ASX Ltd announced in May 2022 that the delivery date was no longer viable and stopped the project later that year. It eventually regrouped, developing a new replacement for CHESS - a system that still runs on the decades-old computer language COBOL. ASX Ltd will pay a penalty of $20.5 million and contribute $3m to ASIC’s legal costs, with the matter no longer going to trial. ASX chair David Clarke apologised in a statement to the market on Monday, saying the new CHESS project was “now on firmer footing”. The first release, handling clearing services, was delivered just two months ago while the second stage, which will handle settlement activities, is targeted for delivery in 2029. “When we stopped the CHESS project in November 2022 to reassess our whole approach, that tested market confidence in ASX and and called into question the nature of statements previously made,” Mr Clarke said. “As the market operator and a steward of critical market infrastructure, our words matter. I am sorry ASX fell short. “We recognise the impact this has on trust and confidence, and we take responsibility for the lessons that must be learned from that experience.” Pulling the plug on the original project angered investors and trading firms that had spent millions on their own upgrades in order to work with the experimental technology. The new system can accommodate three times more volume, will be faster and is cloud-based, with Amazon Web Services the bourse’s main partner. ASIC chair Sarah Court said CHESS was critical market infrastructure at the centre of Australia’s financial system. “These admissions concern the accuracy of disclosures to the market about a significant and complex project that carried real consequences for confidence, planning, and investment across the market,” Ms Court said. “Accurate and timely disclosures are fundamental to maintaining trust in Australia’s financial markets, particularly from entities that operate core market infrastructure.” ASX Ltd interim chief executive Darren Yip was appointed in late May following the departure of Helen Lofthouse, who took the helm in 2022 when the project wasn’t delivering. Former Euronext boss Anthony Attia is set to become the boss on September 1. ASIC originally alleged ASX Ltd had made three misleading statements about the project but is no longer pursuing the other two allegations.