Chapter 5The ASX CHESS Replacement Project - Background

Introduction

5.1This chapter provides some background information on:

The Australian Securities Exchange’s (ASX’s) Clearing House Electronic Subregister System (CHESS);

the CHESS Replacement Project;

a timeline of events;

the project pause in November 2022;

the Australian Securities and Investments Commission (ASIC) investigation;

other ASIC and Reserve Bank of Australia (RBA) regulatory actions; and

the new CHESS solution design in November 2023.

5.2Chapters 6 and 7 discuss issues for the CHESS Replacement Project that were considered during the committee’s inquiry.

CHESS

5.3Following execution of a trade for buying or selling a financial product, the trade is cleared and then the title (legal ownership) is exchanged for money. That legal exchange is called settlement and occurs a couple of days after the trade. To facilitate the clearing and settlement of financial product trades, the ASX uses CHESS. CHESS is used for shares, warrants, stapled securities, options, and units in trusts. The two main functions of CHESS are:

maintaining a register of the title holders of the securities; and

transferring the money and the title between the buyer and seller.[1]

5.4Holders of securities can choose whether to register their titles with CHESS or another issuer-sponsored subregister. Stockbrokers or settlement agents (often called CHESS Sponsors) interact with CHESS or other share registers on behalf of buyers and sellers. CHESS sponsors, brokers and settlement agents are regulated by the Corporations Act 2001, and ASX Settlement Operating Rules.[2]ASIC and the RBA are co-supervisors of licensed clearing and settlement facilities, including CHESS.[3] Further background information on clearing and settlement is available in chapter 2.

The CHESS Replacement Project

5.5The current CHESS system is around 25 years old. The original CHESS Replacement Project was intended to:

carry forward existing CHESS functionality;

add new customer-requested functions and provide access via messaging;

upgrade the underlying hardware and security;

provide optional access via blockchain Digital Ledger Technology; and

replace the old COBOL[4] software with a system built on Java and the Digital Asset Modelling Language – chosen by the International Swaps and Derivatives Association to standardise the Over-The-Counter derivatives trading.[5]

5.6The ASX website now has an updated description of the CHESS Replacement Project:

The replacement of CHESS provides issuers and end investors with greater control over, and enhanced confidence in, market activities through timely, secure and simplified access to the register of holders (for issuers), financial assets (end investors) and associated information. It enables the industry to meet and respond to changing local and global markets, and promote further innovation through new levels of functionality, open standards and flexible technology.[6]

Timeline

5.7A timeline of some relevant events for the CHESS Replacement Project is summarised in Table 5.1 below.

Source: In footnotes as indicated in table text and in all other case the following two sources: ASX, About CHESS Replacement: CHESS Replacement process, https://www.asx.com.au/markets/clearing-and-settlement-services/chess-replacement/about-chess-replacement (accessed 16 November 2023); ASX, answers to questions on notice, 008, 8 June 2023 (received 23 June 2023), pp. 9–10; ASIC Submission 7, pp. 11–13.

The project pause in November 2022

5.8On 17 November 2022 and following an independent review by Accenture, the ASX, citing significant technology, governance, and delivery challenges, announced that the CHESS Replacement Project would be paused and reassessed:

The ASX would reassess all aspects of the CHESS Replacement Project following the Accenture review, and its internal assessment.

The Accenture report identified significant challenges with the solution design and its ability to meet the ASX’s requirements.

Current activities on the project were paused while the ASX revisited the solution design, and a project director with extensive technology transformation experience was appointed.

The CHESS Replacement Project capitalised software was to be derecognised considering the solution uncertainty, resulting in a charge of $245–255million pre-tax ($172–179 million after tax).[65]

5.9In announcing the project pause and reassessment, the ASX noted that the independent report identified significant issues, including:

The application software was only 63 per cent complete when considering both functional and non-functional requirements, and the timeline for completion was uncertain.

Complexity in the integrated solution design, including how the ASX requirements interact with the application and underlying ledger. These complexities contribute to challenges in achieving the necessary supportability, scalability, and stability for clearing and settlement.

Project governance and vendor management issues in how teams from the ASX and its delivery partner Digital Asset operate and interact with challenges in project delivery.

Several inefficiencies in the delivery lifecycle through to testing, with siloed execution and reporting resulting in misaligned views of status on delivery progress, risks, and issues.[66]

5.10Accenture’s review of the solution design highlighted the need for more significant consideration of how the Australian market business workflows interact with the application and underlying ledger. The current design is contributing to challenges in achieving scalability, resilience, and supportability, including:

Business workflows or requirements were not tailored for a distributed environment.

The absence of appropriate design artefacts, rigour, or inconsistent design discipline to model the expected behaviour within the constraints of the technology.

Adding or changing new functionality would inherently require migration of existing contracts, including recreations of core system and API contracts.

High complexity of operations and maintenance to spot fix, long turnaround to evaluate/remediate issues.

A more significant consideration is required regarding the purpose of the consensus layer, given ASX’s position as the central market operator for the CHESS use case.[67]

5.11The impact of the problems with the CHESS Replacement Project on industry participants has been significant. For example:

Share issuers raised concerns about the transition and ongoing costs of the new CHESS system.[68]

Computershare noted that industry participants have suffered both realised and opportunity costs.[69] Computershare had over 60 people working on this project for over five years, and incurred somewhere between $15 million and $20 million in costs.[70]

NSXA submitted that industry participants have sunk costs more than $100m for the abandoned CHESS Digital Ledger Technology solution.[71]

The Stockbrokers and Investment Advisers Association consulted its members on costs that they incurred in preparing their systems for the CHESS Replacement Project, and reported that a third of members responded, and the aggregate figure was $69 million.[72]

ASIC noted that the problems with the CHESS Replacement Project resulted in a $250 million write-down with flow on impacts on ASX shareholders, as well as cost impacts and other collateral impacts for market participants who were asked to invest in the testing.[73] Mr Yanco expanded on the issues faced by market participants:

A project like this is planned well ahead. So the initial frustration for the market participants, particularly the global firms, is that they have to plan, a year or two years out, any significant IT changes. So they've got to lock in a date. They've had to change that date four times, now, which means they've lost opportunities to do other things, including some of the work that we've asked them to do about being able to move their business to a different exchange when there's an outage. So there's an opportunity cost and an actual cost. Some of the firms rely heavily on vendors. There are some significant vendors that have incurred major costs, again at an opportunity cost to themselves in building up their own technology and modernising their own technology. So, across the board, it's beyond disappointment. It's really hard costs and opportunity costs.

Tens of millions. Tens of tens of millions.

You've also got the share registries having to do work as well. There are 80-odd participants, of which there are some large ones that would have incurred millions of dollars of costs. Then there are all the custodians and settlement participants that have had to build to that. There are all the vendors that support these organisations that have each had a major IT build. It's probably 10 million upwards for each of those. And then there are the share registries. There are three major ones, and each will have had a big IT build. I'm not saying a hundred million, or anything; I'm just saying it's going to be a large number.[74]

Scalability and other issues with distributed ledger technology

5.12Scalability of the distributed ledger technology was identified as one of the main reasons for the project pause. This section summarises the evidence the committee has received on scalability issues with the distributed ledger technology used in the CHESS Replacement Project.

5.13Performance and scalability was one of several non-functional requirements for the CHESS Replacement Project. Functional requirements relate to the business operations, what they are supposed to do, and the non-functional requirements related to whether they can go fast enough and does it have the capacity to do things on time?[75] Other non-functional requirements for the CHESS Replacement Project were security, integration, resilience, supportability, and release and support. Functional requirements for the CHESS Replacement Project included the trade and obligation engine, the netting engine, default management, the settlement engine, payment interfaces, asset servicing, and data services.[76]

5.14The Accenture review reported on the six core issues with the CHESS Replacement Project identified by the ASX: Holdings, Batch Settlement, Bulk Process Support and Resiliency, Bilateral Matching, Issuer (Holder Identification Number) Notifications, and Support for Ex-Transactions. Accenture’s analysis of those core issues identified four underlying drivers contributing to the challenges in the current solution design:

Latency – Distributed systems introduces higher latency. In the current architecture, the latency is further increased due to the round-trip data flow of submitting a transaction to the client node through to writing the data to the ledger and distributing back to the client nodes and the CHESS Replacement Application. This design preserves optionality for providing a node to ASX’s clients in the future. However, the latency comes at a cost and some workflows needing serial processing may run into challenges meeting the non-functional requirements.

Concurrency – The architecture design supports concurrency which helps allow for scale which is required to meet ASXs non-functional requirements. However, concurrent processing can cause contention when processing multiple in-flight transactions targeting the same dataset (e.g., holdings targeting the same broker, security, and [Holder Identification Numbers]). To remediate this issue, batching/grouping is introduced; however, grouping transactions together does not remove the contention problem forcing serialised processing for some workflows.

Batch Processing (Transaction Grouping) – To solve for concurrency, to achieve scale, and to meet the non-functional requirements with the contention issues noted above, groups of transactions are combined into a single batch for processing. This batch, however, is limited by constraints imposed that need to be configured and tested further.

Technical Constraints – Batching of transactions to process could be constrained by practical limits in Daml Ledger API (size of a Daml object on ledger) and VMBC (total size of a transaction message) which needs to be designed for and tested further. These limits could be a hindrance to extensibility.[77]

5.15Accenture considered that the above drivers may not cause issues for the CHESS Replacement Project in isolation or with simple transactions. However, they become crucial for complex batch workflows or transactions that require scaling.[78] Accenture identified scalability as one of the main reasons for the need to redesign the project:

Extending the ability of the platform to handle increased loads may require further design changes. Simple vertical scaling alone of increasing memory/CPU/disk may not be adequate to handle new loads. In the Core Issues, some choices were discussed with potential future scale considerations in the proposed designs. Remediations addressing the Core Issues were proposed for those issues, but further testing is needed to ensure other processes do not face similar scalability challenges.

Achieving scalability with concurrency is complex and requires appropriate designs. Concurrent processing can cause contention when processing multiple in-flight transactions targeting the same dataset.[79]

5.16Accenture also noted that scalability concerns about digital ledger technology were known in the industry:

Australia was one of the first clearing houses that announced their intent to re-platform CHESS for clearing and settlements infrastructure, based on distributed ledger architecture. There was a lot of interest in it globally. It was one model and it was very aspirational at the time, based on nascent technology. If we look at some of the other models we're seeing evolving across the ASX's peers, there is incremental evolution. There has been a lot of work done around prototyping and understanding two key dimensions. One is: architecturally, does the technology support performance scale? Secondly, from a functional perspective, will the core clearing and settlement use cases be supported through this technology?[80]

5.17Helen Bird and William Klein suggested that project scalability risks were not properly identified and managed, with the result that it was never clear whether the proposed blockchain technology could in fact adequately replace the existing CHESS system.[81]

5.18ASIC Information Sheet 219 on evaluating distributed ledger technology, published in 2017, warned prospective users of the technology about issues with scalability:

We would like to understand the possible impact your [Distributed Ledger technology]-based service may have on others. For example, how scalable is your proposal? Where the solution is considered highly scalable, what risk trade-offs (if any) have been identified to enable this? We are interested in these questions because any DLT-based service will typically operate within a broader market environment and the impact of its success or failure has the potential to also affect people who do not directly use the service.[82]

5.19The ASX provided some background on how distributed ledger technology was selected for the project:

At the outset of the original project, when the solution options were being explored, at that time distributed ledger technology was emerging as something that could be potentially transformational for this type of application. I think, as we've previously explained, having really transformed the service for the Australian economy with the original implementation of CHESS, there was a keen interest from both ASX and parts of the market in how we might make sure that we were delivering some significant uplift in terms of the new application, and that's really the reason that distributed ledger technology was being explored. Clearly there are some risks there, and at the time that was addressed by, initially, a process to explore who had deep expertise in distributed ledger technology, which was a multistage process. As you know, Digital Asset was identified through that process as being a compelling candidate. Then that took us through to a two-year process where the focus of that process was really to test out whether the technology was going to be able to meet the very high standards that are required from critical market infrastructure like Australia's clearing and settlement system. So that was the focus of that two-year piece of work prior to the project commencing in earnest.[83]

5.20The digital ledger technology was implemented using the Digital Asset Modeling Language (Daml), which is Digital Asset’s smart contracting language. Digital Asset advertises Daml features on its website as follows:

Daml, Digital Asset’s core technology comprises smart contracting language and tooling which underpins ASX Synfini and defines the schema, semantics, and execution of transactions between distributed parties. This Blockchain protocol allows organisations to build and run multi-party applications that bring together traditionally disjointed processes, software and systems.

As an open source technology, Daml is accessible to different multiple groups, including enterprises, ledger operators, and application developers but maintains privacy at its core making it easy to control permissions for more effective collaboration. Daml eliminates duplicate processing and manual reconciliation within an organisation and with third parties via seamless access to permissioned workflows. It provides reliable data and audit trails, and creates a foundation for more and robust innovation.[84]

5.21The Accenture review raise concerns regarding the suitability of Daml:

Daml is a business-oriented language that provides flexibility for defining business rules and processes in a distributed environment. In the current solution, Daml is used to solve most of the business workflows rather than determining on-ledger vs. off-ledger fit for data, business logic, or calculations. Accenture’s review highlighted that while there are benefits of using Daml for distributed processing, further considerations are required:

• From a participant standpoint in the current design and architecture (not withstanding future use cases), there is little value to processing all the business logic on-ledger as ASX maintain data integrity as the market operator and participants receive a point-in-time view via API contracts.

• There is an opportunity to use Daml strategically to maximise its benefits while avoiding the limitations expected with its distributed nature.

• Certain business processes or data models could suffer from performance or scale issues in the future due to design choices (e.g., holdings, ex-transactions, etc.)

• Greater consideration of long-term plans such as bilateral workflows (if any) between parties in Daml should be given to avoid redesigns in the future (e.g., authorisation pattern).

The code review highlighted the existence of a high quality Daml implementation providing considerable efficiencies relative to the current CHESS and is not contributing to the Core Issues, however, introduces potential supportability challenges in the long term due to the skills availability and the interconnectedness of the Daml contracts.[85]

5.22Based on the above findings, Accenture made the following recommendation to the ASX to improve scalability, resiliency, and supportability:

Review the solution design to meet future growth and the ASX’s strategic objectives.

Explore opportunities to simplify the solution design.

Review Daml use to meet long-term objectives.

Optimise on-ledger and off-ledger processing for transactions.

Shift left testing to compress long sequential feedback loops.

Remediate root causes of the known core issues.[86]

5.23The ASX confirmed that non-functional requirements, including performance, scalability, and supportability, were the main issues driving delays in the delivery of the software:

The final code updates on those areas to be able to deliver on all of those non-functional requirements, which, as you say, very importantly include performance, scalability and supportability—those were really the areas that were causing the issues. That's exactly what was driving the series of escalating delays that we were seeing in final delivery of software. That caused us to communicate the delays during the course of this year and then, of course, led to us commissioning the Accenture report in the beginning of August.[87]

5.24The ASX commented on why the scalability issues were identified in 2022 rather than earlier in the project:

I think that one of the challenges, which we can see very clearly from the Accenture report, is it meant that some of the key non-functional requirements were actually quite late in the project schedule. And that is exactly the area where the really material issues have emerged.[88]

The issues here are really around the non-functional requirements and making sure that we have the right scalability for the future in some of the core areas of clearing and settlement. While our customers have been interacting with the functional parts of the system for some time now, we really need to make sure when we're replanning this project that we're looking very carefully at where those problems actually arose.[89]

5.25ASIC also drew attention to processing capacity and scalability as contributing issues to the project delay:

This further delay was based on user feedback, the inclusion of additional functionality and expanded industry wide testing, and the need for greater trade processing capacity and system scalability.[90]

5.26ASIC commented on the use of distributed ledger technology and the confidence that the ASX may have placed in it:

My understanding of the history is that the decision to embark upon this technology solution was entirely that of ASX and its then senior leadership, without much evidence, to my understanding, of consultation with the market and others. They had a lot of self-confidence in their own expertise and their own vision for what the stock exchange could achieve using distributed ledger technology and related technologies. They backed their own judgement. That's what happened. They had some very senior people who felt strongly about this technology and were very confident that it could be made to work. There was an investment in digital assets. So that's where the journey started.

The reason I use the word hubris is that as the years went by and the delays started occurring—and perhaps that feedback you were referring to, Senator, began to materialise—that original confidence became overconfidence. We now know, after all these years, that there were fundamental issues that simply weren't picked up on until a month ago.[91]

5.27Computershare indicated that it was not sure that digital ledger technologies were suitable for the scale of operations required for the ASX and clearing and settlement, however, other smaller applications may be viable:

These new technologies that ASX has been embarking on do not appear to be fit for purpose for the existing stock market. However, they, 'others', should be allowed to deploy these to ensure that we have innovation, but in a much smaller and narrower context. It's not scalable for the existing equities market.[92]

5.28Finclear indicated that it had developed a smaller platform using digital ledger technology from Digital Asset, indicating that in a far more discrete implementation, the technology can be fit-for-purpose.[93]

5.29The ASX informed the committee in June 2023 that the ASX had concluded that:

It was very important for us to deliver the business requirements that were needed by the Australian market and that reflected current practices, in addition to being able to deliver scale and flexibility for new functionality in the future.

Our conclusion from the review that we undertook was that the solution design that we'd selected, as it currently stood, wasn't able to meet those requirements. Some of those requirements were related to the current practices and the way settlement works in Australia today.[94]

As part of their redesign work, we're looking at solutions which can support the current models of support and batch while also being help bridge to the future. The challenge that the six core issues pointed out was that the technology plan that was initially started out couldn't support both at the same time.[95]

5.30Digital Asset noted that the new CHESS would be required to process a number of daily transactions of approximately twice the largest market event. In the early phases of the project, the capacity was estimated to be two million trades per day. However, the March 2020 peak associated with the COVID-19 pandemic was around 7.2 million, so the new CHESS would be expected to have capacity for around 15 million daily trades. Digital Asset indicated that things that were difficult to scale became completely untenable to scale at those higher requirements.[96]

5.31On 1 October 2020, the Reserve Bank and ASIC issued a joint media release outlining their expectations for the CHESS Replacement Project. They expected the ASX to:

replace CHESS as soon as this can be safely achieved;

take into account CHESS user feedback from its recent consultations and revisions to the project implementation timeline;

achieve a significant uplift in intraday trade processing capacity and end-of-day processing performance in the new system’

demonstrate the readiness of the CHESS Replacement Project; and

supporting independent assurances to the regulators before migrating to the new system.[97]

5.32Digital Asset suggested that the scalability issues arose from the requirements:

…conflict between ASX’s stated transformational objective and its desire to retain both the legacy CHESS processes and functionality presented a significant obstacle for the Transformation Project, as the old CHESS architecture and functionality was not readily compatible with the modern, scalable system that Digital Asset had been engaged to help design and build.[98]

5.33Digital Asset argued that the netting requirement[99] was incompatible with any modern clearing and settlement system’s scale requirements, regardless of the underlying technology.[100] Digital Asset also said that many other market operators were using its technology.[101]

5.34The ASX disputed Digital Asset’s view above, stating that the 2 million trades per day requirement only applied to the proof-of-concept stage and that the ASX had higher requirements for the CHESS when it was to go live and further into the future:

I think the key point to make here is that one of the key requirements for the system is scalability. By that, I mean that typically what we would be doing is indicating the specific capacity that's needed at the point of go-live, but, for a system to then last and be flexible to scale to what the market needs in the future, what you also need is a path to scalability. That was always a core requirement. I think there were some changes in the scale requirement. I think the original requirement of what was needed for the proof-of-concept stage was two million, but then, as I understand it, the original requirement for the go-live was 10 million. That was increased during the COVID period when we saw actually much increased trade volumes, which set a record, and so the initial requirement at go-live was also increased to reflect the need for headroom over and above that record volume.[102]

The new CHESS solution design

5.35On 20 November 2023, the ASX announced that:

It had completed a reassessment of the solution design to replace CHESS and would proceed with a product-based solution delivered by a global technology provider – TATA Consultancy Services, which already provides related products and services in Finland, South Africa, New Zealand, and Canada.

The CHESS Replacement Project will now focus on the detailed design and implementation, with further stakeholder consultation in the first quarter of 2024.

The TATA product solution will provide a scalable modular technology platform to satisfy the ASX Clear and ASX Settlement licence obligations and support new services, innovations, or other providers.

The indicative timeframe for implementation has been brought forward and split into two stages, with clearing services expected to be available from 2026 and settlement services from 2028 or 2029.

Accenture has been selected as the solution integrator.[103]

5.36The ASX noted feedback and industry input from the Advisory Group and other sources and that the TATA product, and the new solution design address the needs of the current market and industry and customer issues with the previous design solution, including:

Improved scalability to support operational resilience and future market growth.

Staged implementation and modular design to remove the single cutover risk and enable stakeholders to better adjust.

Potential reuse of some of the industry investments made in workflow and global messaging standards.

Interoperability through the modular architecture for unaffiliated market operators and clearing and settlement facilities.

Innovation and new services through connectivity with alternative technologies.[104]

5.37ASIC and the RBA welcomed the ASX’s solution design for the CHESS Replacement Project and noted the important advice from the Advisory Group:

The product-based solution and vendor announced by ASX is a foundational step in getting the CHESS [Replacement Project] back on track.

This is an important decision by ASX, but there is still a long way to go to deliver a CHESS [Replacement Project]. It will be critical for ASX to now focus on engaging with the market on the detailed design of the CHESS [Replacement Project] with a realistic and achievable timeline for implementation.

The Advisory Group considered that a product-based solution, presented by ASX, and assessed by it, is an appropriate option to support a safe and timely replacement of CHESS. In addition, the Advisory Group responded with recommendations to ASX to provide clear statements on the industry impact, including the benefits to the market of the selected solution and ASX’s commitment to building a system that is interoperable.[105]

5.38Chapter 6 of this report discusses issues for the CHESS Replacement Project that were considered during the committee’s inquiry.

Footnotes

[1]ASX Settlement Corporation, CHESS Clearing House Electronic Settlement System, Brochure,pp.2–3,7.

[2]ASX Settlement Corporation, CHESS Clearing House Electronic Settlement System, Brochure, pp.2–3,7.

[3]ASIC, 20-229MR ASIC and RBA announce expectations for CHESS replacement, 1 October 2020.

[4]COBOL stands for Common Business Oriented Language. It is a standard programming language that was developed in 1959 to support business and financial applications.

[5]ASX, CHESS Replacement, https://www2.asx.com.au/markets/clearing-and-settlement-services/chess-replacement (accessed July 2022).

[6]ASX, About CHESS Replacement, https://www.asx.com.au/markets/clearing-and-settlement-services/chess-replacement/about-chess-replacement, (accessed 16 November 2023).

[7]Helen Bird and William Klein, Submission 11, p. 59.

[8]ASX, answers to questions on notice, 001 – Attachment, p. 2, 5 December 2022 (received 6February2023).

[9]RBA, 2015/16 Assessment of ASX Clearing and Settlement Facilities, September 2016.

[10]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[11]RBA, Assessment of ASX Clearing and Settlement Facilities, September 2017.

[12]ASX, answers to questions on notice, 001 – Attachment, p. 2, 5 December 2022 (received 6February2023).

[13]ASX, answers to questions on notice, 001 – Attachment, p. 2, 5 December 2022 (received 6February2023).

[14]ASIC, Review of ASX Group’s technology governance and operational risk management standards, Report 592, September 2028; Helen Bird and Willian Klein, Submission 11, p. 59.

[15]RBA, Assessment of ASX Clearing and Settlement Facilities, September 2018.

[16]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[17]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[18]ASIC, Submission 7, p. 12.

[19]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[20]RBA, Assessment of ASX Clearing and Settlement Facilities, September 2019.

[21]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[22]ASIC, Submission 7, p. 12.

[23]ASX, answers to questions on notice, 001 – Attachment, p. 3, 5 December 2022 (received 6February2023).

[24]ASIC, Submission 7, p. 12; ASX, answers to questions on notice, 001 – Attachment, p. 2, 5December2022 (received 6 February 2023).

[25]ASX, answers to questions on notice, 001 – Attachment, p. 3, 5 December 2022 (received 6February2023).

[26]ASX, After extensive industry consultation and a comprehensive project review, ASX increases the scope of CHESS replacement and resets the go-live date to April 2023, 28 October 2023.

[27]RBA, Assessment of ASX Clearing and Settlement Facilities, October 2020.

[28]ASX, answers to questions on notice, 001 – Attachment, p. 2, 5 December 2022 (received 6 February 2023).

[29]ASIC, Submission 7, p. 12.

[30]ASX, Information Paper: ASX Data Governance under CHESS and CHESS Replacement, December 2020.

[31]ASX, answers to questions on notice, 001 – Attachment, p. 4, 5 December 2022 (received 6February2023).

[32]ASX, answers to questions on notice, 001 – Attachment, p. 3, 5 December 2022 (received 6February2023).

[33]ASX, answers to questions on notice, 001 – Attachment, p. 4, 5 December 2022 (received 6February2023).; ASX, CHESS Replacement: Confirmed changes to netting and settlement workflow: Response to consultation feedback, June 2021.

[34]ASX, answers to questions on notice, 001 – Attachment, p. 3, 5 December 2022 (received 6February2023).

[35]ASX, answers to questions on notice, 001 – Attachment, p. 5, 5 December 2022 (received 6February2023).

[36]RBA, Assessment of ASX Clearing and Settlement Facilities, September 2021.

[37]Digital asset modelling language (Daml)

[38]ASX Limited, 2022 Half-year results presentations and speaking notes, p. 17.

[39]Mr Joseph Longo, Chair, ASIC, Committee Hansard, 11 February 2022, pp. 3, 6, 8–9.

[40]EY, Independent assessment of ASX’s Assurance Program for it Implementation of the CHESS Replacement Program, 28 February 2022, p. 2.

[41]ASX, CHESS replacement project update – changes to software release timing and implications for project milestones, March 2022 https://www2.asx.com.au/content/dam/asx/markets/clearing-and-settlement-services/chess-replacement-project-update-220328.pdf (accessed 16 November 2023).

[42]ASX, CHESS replacement project update – confirmation of delay to April 2023 go-live, May 2022, https://www2.asx.com.au/content/dam/asx/documents/unlinked-docs/chess-replacement-project-update.pdf (accessed 16 November 2023).

[43]ASIC, Submission 7, p. 12.

[44]ASX, answers to questions on notice, 001 – Attachment, p. 3, 5 December 2022 (received 6February2023).

[45]ASX, CHESS replacement project – Delay to project schedule; ASX to commission an independent review of new application software, (accessed 16 November 2023).

[46]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 4.

[47]RBA, Assessment of ASX Clearing and Settlement Facilities, September 2023.

[48]ASX, CHESS Replacement Project Update: Publication of Accenture’s findings – ASX CHESS replacement application delivery review, https://www2.asx.com.au/content/dam/asx/markets/clearing-and-settlement-services/chess-replacement-project-update-publication-of-accentures-findings-asx-chess-replacement-application-delivery-review.pdf (accessed 16 November 2023).

[49]Mr Joseph Longo, Chair, ASIC, Committee Hansard, 27 June 2023, p. 18.

[50]ASX, CHESS Replacement Project – ASIC Investigation, Market Announcement, 29 March 2023.

[51]ASX, ASX Special Report - Response to recommendations made in the CHESS Program External Review, June 2023.

[52]EY, Audit of the Special Report on support and maintenance of CHESS, 31 May 2023.

[53]ASIC & RBA, Joint letter of regulatory expectations for ASX cash equities and settlement advisory group, 29 August 2023.

[54]ASX, ASX appoints Alan Cameron as Independent Chair for new Clearing and Settlement Advisory Group, Media Release, 3 August 2023.

[55]ASIC & RBA, Joint letter of regulatory expectations for ASX cash equities and settlement advisory group, 29 August 2023.

[56]ASX, Response to regulatory expectations for ASX cash equities and settlement advisory group, 30August2023.

[57]ASX, ASX Cash Equities Clearing and Settlement Advisory Group Communique, 11 October 2023.

[58]ASX, ASX Cash Equities Clearing and Settlement Advisory Group Communique, 11 October 2023.

[59]RBA, Assessment of ASX Clearing and Settlement Facilities, October 2023.

[60]ASX Cash Equities Clearing and Settlement Advisory Group,Communique, 20 November 2023;

[61]ASX, ASX announces product based solution for the CHESS Replacement – Industry consultation to occur in 2024, 20 November 2023.

[62]ASX, Cash Equities Clearing and Settlement Advisory Group,Communique, 20 November 2023.

[63]ASX, Program Management Special Report, Special Report on Project, Program and Portfolio Management, September 2023; EY, Review of Special Report on Portfolio, Program and Project Management (PPPM), 13 October 2023; ASIC, ASIC acknowledge ASX’s release of the Portfolio, Program and Project Management Special Report and Audit Report, Media release, 27 November 2023.

[64]EY, Fourth Six Monthly Progress Report by EY on an Independent Assessment of the ASX’s Assurance Program for its implementation of the CHESS Replacement, Project 31 December 2023.

[65]ASX, ASX will reassess all aspects of the CHESS replacement project and derecognise capitalised software of $245–255 million pre-tax in 1H23, 17 November 2022.

[66]ASX, ASX will reassess all aspects of the CHESS replacement project and derecognise capitalised software of $245-255 million pre-tax in 1H23, 17 November 2022.

[67]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 6.

[68]Governance Institute of Australia, Submission 5, p. 2.

[69]Computershare, Submission 6, p. 8; Australian Custodial Services Association, Submission 11, p. 3; Ms Helen Bird & Mr William Klein, Submission 12, p. 15.

[70]Mr Paul Conn, President, Global Capital Markets, Computershare Ltd, Committee Hansard, 23February 2023, p. 43.

[71]NSXA, Submission 3, p. 2.

[72]Ms Michelle Huckel, Policy Manager, Stockbrokers and Investment Advisors Association Committee Hansard, 23February 2023, p. 46.

[73]Mr Joseph Longo, Chair, ASIC, Committee Hansard, 5 December 2022, pp. 38–39.

[74]Mr Greg Yanco, Executive Director, Markets Group, ASIC, Committee Hansard, 5 December 2022, p.42.

[75]Mr Nathan Hicks, Managing Director, Financial Services, Accenture, Committee Hansard, 23February 2023, p. 30.

[76]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 27.

[77]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 5.

[78]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 16.

[79]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 19.

[80]Mr Srikant Yennamandra, Managing Director, Digital Assets Lead, North America, Accenture, Committee Hansard, 23 February 2023, p. 28.

[81]Helen Bird and William Klein, Submission 12 (Revised), p. 23.

[82]ASIC, Evaluating distributed ledger technology, Information Sheet 219, March 2017, https://asic.gov.au/regulatory-resources/digital-transformation/evaluating-distributed-ledger-technology/ (accessed 13 December 2023).

[83]Ms Helen Lofthouse, Chief Executive Officer and Managing Director, ASX, Committee Hansard, 8June 2023, p. 36.

[84]Digital Asset, What is Daml and how does it work?https://www.asx.com.au/connectivity-and-data/dlt-as-a-service/daml (accessed 12 December 2023).

[85]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 6.

[86]Accenture, ASX CHESS Replacement Application Delivery Review, November 2022, p. 7.

[87]Ms Helen Lofthouse, Managing Director and Chief Executive Officer, ASX, Committee Hansard, 5December 2022, p. 7.

[88]Ms Helen Lofthouse, Managing Director and Chief Executive Officer, ASX, Committee Hansard, 5December 2022, p. 11.

[89]Ms Helen Lofthouse, Managing Director and Chief Executive Officer, ASX, Committee Hansard, 5December 2022, p. 12.

[90]ASIC, Submission 7, p. 12.

[91]Mr Joseph Longo, Chair, ASIC, Committee Hansard, 5 December 2022, p. 40.

[92]Mr Paul Conn, President, Global Capital Markets, Computershare Ltd, Committee Hansard, 23February 2023, pp. 44–45.

[93]Mr David Ferrall, Founder and Chief Executive Officer, FinClear; Member, Stockbrokers and Investment Advisors Association, Committee Hansard, 23 February 2023, p. 49.

[94]Ms Helen Lofthouse, Chief Executive Officer and Managing Director, ASX, Committee Hansard, 8June 2023, pp. 21–22.

[95]Mr Tim Whitely, Chief Information Officer, ASX, Committee Hansard, 8June 2023, p. 22.

[96]Mr Eric Saraniecki, Co-founder and Head, Strategic Initiatives, Digital Asset, Committee Hansard, 8June 2023, p. 2.

[97]ASIC, ASIC and RBA announce expectations for CHESS replacement, ASIC Media Release 20-229MR, 1October 2022; see also Helen Bird and Willian Klein, Submission 11, p. 61.

[98]Digital Asset, Submission 9, p. 7.

[99]Netting reduces credit, settlement, and other risks of financial contracts by aggregating (combining) two or more obligations to achieve a reduced net obligation. Gabriella Rosenberg, Central Bank of Argentina Maria Carmen del Urquiza, Argentine Securities and Exchange Commission, DavidMiller, Bank of America, N.A,What is Netting? How Does Netting Work?p. 2.

[100]Digital Asset, Submission 9, p. 7.

[101]Mr Eric Saraniecki, Co-founder and Head, Strategic Initiatives, Digital Asset, Committee Hansard, 8June 2023, p. 1.

[102]Ms Helen Lofthouse, Chief Executive Officer and Managing Director, ASX, Committee Hansard, 8June 2023, p. 35.

[103]ASX, ASX announces product based solution for CHESS Replacement – Industry consultation on next phase to commence in 2024, 20 November 2023; A solution integrator is a technology provider that can deliver and support modern IT solutions. From architecting to execution and management, Solutions Integrators offer end-to-end digital transformation capabilities; Insight Glossary, What is a Solutions Integrator, https://www.insight.com/en_US/content-and-resources/glossary/s/solutions-integrator.html (accessed 19 December 2023).

[104]ASX, ASX announces product based solution for CHESS Replacement – Industry consultation on next phase to commence in 2024, 20 November 2023.

[105]ASIC and the RBA, ASIC and RBA acknowledge ASX’s CHESS solution design announcement, Media release, 20 November 2023.