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Highlights
- ASX faces legal proceedings from ASIC over claims of misleading project status.
- ASIC challenges ASX's 2022 statements on blockchain-based CHESS upgrade progress.
- ASX reaffirms actions taken to address project setbacks and reassess future strategy.
The Australian Securities Exchange, ASX (ASX:ASX), recently filed its defense in response to the proceedings initiated by the Australian Securities and Investments Commission (ASIC). This case centers on ASIC’s claims that ASX financial stock misled market participants regarding the status of its blockchain-based CHESS system upgrade, which was intended to modernize its share transaction recording and settlement system.
In mid-August, ASIC raised the allegation that ASX had misrepresented the progress of the CHESS upgrade. Specifically, ASIC claims that ASX’s February 2022 announcement, which stated that the project was "on track for go-live" in April 2023 and "progressing well," was misleading. ASIC asserts that ASX’s statements lacked a reasonable basis, which potentially impacted market trust and transparency, especially as the project ultimately experienced significant setbacks and delays.
According to ASIC Chair Joe Longo, ASX’s assurances about the CHESS upgrade were critical for market participants who rely on ASX’s statements to make informed decisions. He underscored the importance of trust and transparency in the financial market’s infrastructure, noting the ripple effects caused by the project’s delay and eventual cancellation. For stakeholders, the perceived reliability of ASX’s guidance is central, as its updates can shape financial planning and market activity.
In its recent statement, ASX CEO Helen Lofthouse defended the company’s position, asserting that ASX’s 2022 statements regarding CHESS were based on the information available at the time, supporting a “reasonable basis” for their claims. She acknowledged the disruption caused by the delays but highlighted that ASX had since taken corrective actions, including independent assessments of the CHESS replacement project and forming a CHESS Replacement Partnership Program aimed at refining and re-strategizing the project.
The CHESS (Clearing House Electronic Subregister System) has been a foundational part of ASX’s operations since its inception in 1994. Recognizing the need for modernization, ASX began developing a new blockchain-based system in collaboration with Digital Asset, a specialized firm, starting in 2017. Despite an investment of approximately AUD $250 million, persistent issues and delays led to the project’s pause in November 2022, and the blockchain upgrade was eventually abandoned.
ASX shares have responded positively, trading 1.17% higher at $66.55 following the defense announcement. The exchange now looks forward to clarifying its position further as the legal process unfolds.
