ASIC hits ASX Ltd with a please explain over status of its software replacement overhaul

The currently beleaguered Australian bourse operator ASX Limited (ASX:ASX) has been hit by the corporate regulator ASIC with a please explain, asking the organisation to provide a special report into its ongoing CHESS legacy software overhaul program. 

Coverage from the AFR earlier this month highlighted the ASX’s failure to provide any evidence a multi-year $250m program intending to improve in-house facilities had amounted to anything meaningful. 

The CHESS system will now be maintained even further into the future as the organisation continues to look at its overhaul activities. 

ASX shares are today down only -1% in the second hour of trade, however, the bourse operator has lost -26.31% on a year to date basis. 

The company’s problems started back in September when shareholders ultimately took issue with earnings and guidance. 

At the company’s 2022 AGM, 30% of shareholders voted against a remuneration package for former CEO Dominic Stevens. 

Earlier this week, JP Morgan downgraded its price target for ASX on the risk of government intervention. 

ASIC, EY, RBA all to be consulted 

ASIC is specifically asking ASX Ltd for a “special report” on the entirety of the CHESS replacement overhaul. 

On Thursday, the bourse announced its acknowledgement of the request from ASIC; as well as that from the Reserve Bank of Australia (RBA).

ASX will inform both parties of its expectations about how long the CHESS replacement will take, and how long it will cost to keep CHESS going.

The RBA has told the bourse that it needs to maintain CHESS to retain integrity (and trust) in the Australian equity system.

Ernst & Young will also be conducting an audit attached to the report, to go to ASIC. 

CHESS still critical to financial markets 

“Maintaining the high performance of CHESS…is critical to the operation of Australia’s financial markets,” ASX Ltd chief Helen Lofthouse said. 

“With enhancements we have made in recent years, and the investments we will continue to make, ASX is confident that current CHESS will serve the market well into the future.” 

No mention was made of any alternative software by the bourse chief today, except for a reference to a long-term solution. 

“We remain committed to working closely with stakeholders,” Lofthouse added. 

A look at ASX Ltd's six month charts