Former ASX executive and long-time critic of the project Patrick McConnell said the delays were worse than feared.
“Even I’m a bit shocked by the latest announcement. It’s way worse than even I thought given they seem to have kicked the can way down the road to 2025,” Mr McConnell said. “It’s particularly surprising when even a couple of weeks ago they were still saying the work had been done and everything was only a bit delayed.”
Judith Fox, the chief executive of the Australian Stockbrokers and Investment Advisors Association, welcomed the independent assessment of the software and the fact that the ASX has identified that more work needs to be done to develop the solutions.
“We welcome that independent assessment of the remaining deliverables, really the timeline is a consequence of needing to look at the technology,” Ms Fox said.
“The new CEO [Ms Lofthouse] has expressed support for the CHESS replacement project but has sought this independent assessment because she wants to give stakeholders more confidence.”
Questions of independence
But Ms. Fox warned the delays would be costly for market participants, even with increased certainty over the timeline.
“It’s a step in the right direction because an assessment is a very welcome thing but of course the further delay is in itself very challenging,” Ms Fox said.
“The further delay is extremely challenging for our members because it does imply further costs. They’ve brought on additional resources that will likely sit idle, they’ve allocated existing budgets, not to mention the amount of re-work that will need to be done.”
Some market participants raised questions about Accenture’s true independence, given that it is already working with ASX on the implementation of the CHESS replacement project.
An ASX spokesperson confirmed Accenture is working with ASX, but said the review would be conducted independently.
“There are members of Accenture working with the ASX on the CHESS replacement project. The review announced today will involve an Accenture team that will be independent from the ones assisting ASX with CHESS replacement,” the spokesperson said.
“ASX has engaged EY to assess the terms of reference for the review to ensure appropriate governance arrangements are in place.”
Dave Curran, who was recently appointed an ASX non-executive director despite his role as a mentor for the CHESS replacement project’s boss, Tim Hogben, also spent 16 years at Accenture.
Accenture declined to comment on client matters.
ASX said Accenture will review the timeline for the CHESS implementation project together with New York-based Digital Asset, which is the provider of the distributed ledger technology for the project. But ASX confirmed it will not look at alternative projects or scaled back measures.
The review comes amid growing regulatory and political scrutiny of ASX, after a market outage that halted trading for a full day in November 2020 led to questions about the market operator’s ability to carry out complex upgrades.
ASIC chairman Joe Longo said the new delays were disappointing but flagged the review would help assure market participants on the timeline.
“Given the delays and duration of the project, it is critical that Accenture now undertake this review to provide assurance on the delivery of a resilient replacement for CHESS and a high degree of confidence in a revised go-live date,” Mr Longo said.
“It is important that the Australian financial system is served well by contemporary infrastructure that is efficient, resilient, reliable and scalable to meet existing and future needs of the market and participants.”
RBA governor Phil Lowe echoed Mr Longo’s disappointment, but said, “the review initiated by ASX is an important step in providing assurance that the new CHESS application software will be fit for purpose”.
While many market participants have urged the ASX to scale back its CHESS replacement project and use an “off the shelf” solution rather than build an entirely new system, the ASX confirmed it will forge ahead with the current plan.
The review will focus on the timeline, in an attempt to offer more certainty to market participants that need to invest in their own systems to connect with the new technology. It will also provide an independent view on the application and software code built to date, the remaining work to be done and make recommendations on delivering the new system safely.
Ms Lofthouse said ASX is continuing to invest in the aging CHESS infrastructure to strengthen its capacity, speed and resilience to cope with higher trading volumes.
“Existing CHESS remains secure and stable, and continues to perform well as we transition to a replacement CHESS system,” Ms Lofthouse said.
Given the CHESS replacement’s importance to national infrastructure, ASX has been under close regulatory scrutiny and is expected to come before parliament later this year.
Ms Lofthouse said while there has been “significant progress” with the project, the independent review will provide details of what work still needs to be done.
“CHESS is a critical system, and we must have high confidence in the schedule to deliver new CHESS safely,” she said.
“I know our customers will be as disappointed as I am with the uncertainty about the timeline for completion. I apologize for the uncertainty, and thank them for their close and constructive work with us on this important project.”
ASX first selected Digital Asset Holdings to build the DLT for the CHESS replacement project at the end of 2017, with plans to test in July 2020 and implementation the following year. But since then, the project has been beset with delays and uncertainty.