ASIC cracks down on ASX for botched CHESS replacement


ASIC is further clamping down on the ASX to ensure that it successfully comes through on replacing CHESS after botching its attempt to overhaul it with blockchain.

Following Accenture's external review into the 25-year-old settlements system, ASIC is requiring the ASX to produce two special reports to make sure that the exchange rectifies its deficiencies.

The External Review Special Report, due June 30, will be an independent review into the CHESS replacement project.

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The second additional report, PPPM Special Report, due on September 29, will detail the ASX's frameworks for the governance and management of portfolios, programs, and projects, and assess them again against international standards.

EY will then audit the reports and hand over the findings to ASIC by July 31 (External Review Special Report) and October 31 (PPPM Special Report).

Accenture identified several issues in its review, one of which includes performance and resiliency issues affecting holdings. This issue may lead to significant outages and performance degradation, Accenture says, leading to functionality outages that ultimately affect the settlement process.

Accenture also found issues with batch settlements, warning that this affects core business functionality, requiring "potentially invasive manual fixes" in case of failures.

The bourse flagged the replacement project in February 2015. Seven years on and $255 million down the drain, the project was canned.

ASIC chair Joe Longo says the new reports will help build confidence in the ASX's ability to deliver the CHESS replacement and any other programs it undertakes.

"More broadly an assessment of ASX's portfolio, program and project management frameworks against internationally recognised frameworks will demonstrate which components are fit-for-purpose and the measures to be adopted to address identified gaps and deficiencies," he says.

In response, ASX managing director and chief executive officer Helen Lofthouse says the exchange is "progressing its action plan to address the recommendations from this independent report".

"In relation to CHESS replacement, good progress has been made in the areas of solution design, quality engineering and testing, and the ASX has identified recommendations which will extend to policies and practices across the organisation," she says.

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Karren Vergara is a financial journalist with Financial Standard, covering wealth management, including superannuation, banking and financial planning. Prior to becoming a journalist, she was an accountant for more 10 years. She has a diploma in journalism and Bachelor's degree in business, both from UTS.