few years ago Australian Securities Exchange (ASX) tried to update its aging CHESS or Clearing House Electronic Sub-Registry Systemusing blockchain technology. While the thought process was logical, the execution was so lacking Australian Securities and Investment The Commission (ASIC) brought an enforcement action.
The ASX paused the project in November 2022 and wrote off approximately $245-255 million (pre-tax) in its own project costs.
According to ASIC, the ASX will now have to pay a $20.5 million penalty for claiming the project was progressing well when it did not actually cause financial harm to market participants. In February 2022, the ASX conceded the shortfall and now the Federal Court has considered the penalty. ASX was also ordered to pay $3 million towards ASIC’s costs.
ASIC Chairman Sarah Court It says the penalty represents the seriousness of the breach relating to a project at the heart of Australia’s financial system.
“Listed entities must be accurate and transparent when updating the market on significant projects, particularly where delays and risks have the potential to impact market-wide confidence, investment and decision-making. This responsibility is even greater for market operators, given their role in protecting critical market infrastructure and ensuring confidence in Australia’s financial system,” Court said.
Judge Markovic, who is overseeing the legal proceedings, said the ASX, as the watchdog of market integrity and trust, needed to be more transparent and accurate in its assessment and set a reference point for others.
The ASX eventually pursued an updated system to replace CHESS in two phases, with the first completed last April. Although the new system does not use blockchain technology, it is expected to allow support for technologies such as distributed ledger.
