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As the replacement technology for the system approaches another critical deadline, there are rumblings about the risks in aiming for a “go-live” date of April 2021.

Readers with a love of history will be fascinated to know there are two chapters in Edna Carew’s history of the Australian Stock Exchange that can be used to support opposite sides in the current fight over the controversial CHESS clearing and settlement replacement.

A chapter in the book on the creation of the CHESS 26 years ago can be used to bolster the argument that any major technological change will always have its detractors.

via apinews.org

ASX deputy Peter Hiom is leading the CHESS replacement project and is committed to running it in the interests of the whole market.  David Rowe

The chapter reveals that during the painful birth of CHESS in 1994, there was vehement criticism from share registries worried about the future of their businesses.

In the end, a compromise resulted in two forms of share registration – issuer sponsored by the company’s share registry and CHESS sponsored by a stockbroker using a holder identification number or HIN.

The CHESS replacement system will use distributed ledger technology, or the equivalent of a private blockchain, to create a single source of truth for the settlement and clearing of all share transactions.


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Carew’s book, National Market National Interest, which was published in 2007, also contains a chapter that can be used to support the argument that the CHESS replacement project carries enormous risk for the industry and the financial system.

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The chapter gives a history of the Taurus clearing and settlement system developed by the London Stock Exchange in the 1990s. It was canned after the LSE spent about £400 million on the project.

The LSE wrote off £100 million and broker member firms lost at least £300 million invested in the failed paperless trading system.

ASX is engaging and listening to all feedback … ultimately, we’ll do what’s best for the whole market.

— ASX spokesman

Ann Bowering, chief executive of issuer services at Computershare, believes there is a danger of the Taurus disaster repeating itself if the ASX does not defer for a year the implementation of the CHESS replacement system.

She has written to about 800 clients of Computershare, detailing the company’s concerns about the CHESS replacement, which is due to go live in April 2021. She says the industry is struggling to digest the 450 pages of CHESS rule amendments released by the ASX for consultation over the past four months.

In a submission to the ASX, Bowering said: “We hold a serious concern with the viability of the overall project being delivered per the timetable in a manner that adequately ensures the continued orderly and proper functioning of the settlement system overall.

“This further raises the possibility that, by continuing to pursue the current aggressive implementation timeline, some of the tens of millions of investment dollars committed to the technical development requirements by all stakeholders, including Computershare, may be put at risk if any part of the industry fails to meet its obligations, or if the system fails to properly connect the different industry segments.”

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The ASX said the two packages of proposed amendments would be followed by a third. It said they “are required to support the operation of the system that will replace CHESS and reflect the solution design for new or changed functionality as captured in the Technical Documentation released by ASX”.

A spokesman for the ASX said: “Some stakeholders may call for more time, others are very keen for the schedule to remain as it is. ASX is engaging and listening to all feedback. That’s been our approach since the start of the project more than four years ago, and we’ll continue to do so.

“Ultimately, we’ll do what’s best for the whole market. Our priority is to ensure transition to the new CHESS system in an orderly and safe way, with the continued close oversight of our regulators.”

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Tony Boyd is The Australian Financial Review’s Chanticleer columnist. Tony has more than 35 years experience as a finance journalist. Connect with Tony on Twitter. Email Tony at [email protected]

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