In November 2022 the Australian Securities Exchange (ASX) paused work on a DLT-based replacement of its CHESS settlement system on which it had spent more than US$169 million and wrote off the investment. Today the Australian Securities and Investments Commission (ASIC) sued the ASX, alleging it made misleading statements prior to canning the project.
It referenced a statement on 10 February 2022 in which the ASX said the project was “on-track for go-live” in April 2023 and was “progressing well”. By March, the ASX said the launch would likely be delayed.
“We allege that the true state of affairs as at 10 February 2022 was that the project was not ‘progressing well’, contrary to ASX’s announcement,” said ASIC Chair Joe Longo.
“The delay and subsequent pause of the project in November 2022 caused significant cost to ASX and market participants who relied on assurances as to the progress of the project and scheduled go-live date.”
Given that listed companies are expected to be diligent and forthright in their communications, ASIC expects ASX to do the same.
Helen Lofthouse took over as ASX CEO on 1 August 2022. Within days she appointed Accenture to perform a review of the progress of the CHESS project. Accenture reported in November at which time ASX froze the work.
The consultant concluded that the project was 63% ready but had reservations about the project management between ASX and DLT-firm Digital Asset. Accenture was concerned about the complexity of the architecture.
In its view, more of the work should have been programmed off chain rather than using the DAML smart contract language, although it praised the quality of the code.
After ditching the work, late last year ASX started again with Tata’s BaNCS solution and Accenture.
Did controversy distract management?
There’s been considerable finger pointing following the project’s failure. Several other large Digital Asset projects have gone live in the meantime.
However, there was another factor that needs to be considered, which is probably not directly relevant to the lawsuit. Some companies, particularly share registrars, were vehemently opposed to the CHESS replacement project, because it affected their business model in a big way. They went as far as filing a competition complaint in 2019. We’ve covered numerous DLT projects, but never one that was contentious like this one.
Hence, ASX managed the project in a combative environment, which would have been distracting. The stock exchange conducted extensive industry consultations, and appeared to be on the back foot in trying to keep everybody happy. This may have impacted the project management, feature creep and the demands ASX made on its service provider.
We’re raising this as a potential learning point that could affect future projects. If initiatives involve incumbents that could be disintermediated by using DLT, they have the potential to disrupt the smooth running of a project. And its outcome.
