Financial Services

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

Thu 15 Dec 22, 12:05pm (AEST)
An individual in a suit discusses a matter with another individual at the opposite side of a table in afternoon light
Source: iStock

Key Points

  • ASX’s push to replace the in-house legacy CHESS software it has used to manage trades has run over budget and time
  • JP Morgan downgraded its price target for ASX Ltd earlier this month noting risk of government intervention
  • ASX Ltd must also provide the RBA its monetary expectations for the CHESS overhaul initiative

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
A look at ASX Ltd's six month charts


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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