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Aussie Stock Exchange Drops Blockchain Plans, Leaving $170m Gap

The blockchain-based update that has been in the works for nearly five years might cost Australia’s principal exchange over $170 million.

What’s Asx Gave The Long-term Plan?

The Australian Securities Exchange (ASX) just gave up on its long-term plan to use blockchain to update its clearing and settlements system.

ASX said on November 17 that it had stopped all work on its “CHESS replacement project” because an independent review by the technology consulting firm Accenture found “significant challenges with the architecture of the solution and its ability to meet ASX’s standards.”

Current activities on the project have been paused while ASX revisits the solution design.

ASX had been working on a Distributed Ledger Technology (DLT) solution to replace its 25-year-old Clearing House Electronic Subregister System (CHESS), which has been used to record shareholdings and manage transaction settlements for the previous five years.
Initially, the system was scheduled to go online in 2020; however, the project has been plagued by several delays over the years, with the ASX citing the need for additional testing time, uncertainties about COVID-19, extra development time, and capacity overhauls before its introduction.
Accenture stated in its 47-page study that business workflows are “not adapted for a distributed environment,” that
the DLT-based system was too complex, and the completion schedule was unknown even though the application software was over 60% complete.

Why Asx Chairman Apologized?

Damian Roche, the chairman of ASX, apologized for the problem and said, “There are major technology, governance, and delivery problems that need to be fixed.”

Helen Lofthouse, ASX’s Managing Director, and CEO said, “It’s clear we need to rethink the solution design.” She also said, “We have some work to do before updating and consulting with stakeholders more deeply.”

Read more: Exchange Becomes a Potential FTX Replacement

The Reserve Bank of Australia (RBA), the country’s central bank, and the Australian Securities and Investments Commission (ASIC), which oversees the country’s financial markets, said the announcement was bad news. They said this in a joint statement.

Philip Lowe, governor of the Reserve Bank of Australia, said that the ASX announcement was “very disappointing.” Joe Longo, chair of the Australian Securities and Investments Commission, said that the ASX had “failed to demonstrate appropriate control of the program to date,” which made it less likely that the ASX could build a world-class, modern financial market infrastructure.

The two groups talked about what they wanted, saying that the CHESS replacement had to be up and running before the current system stopped meeting requirements and that it had to ensure “market and service continuity.”

The ASX must also “uplift its capabilities” and fix “the serious deficiencies identified by the independent report.” The first step in doing this is to make a plan for fixing these problems.

According to the ASX, the project had a pre-tax charge of between $245 million and 255 million Australian dollars.

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