The Australian Securities and Investments Commission (ASIC) has sued the Australian Securities Exchange (ASX), the country’s largest exchange, alleging misleading statements regarding its blockchain-based Clearing House Electronic Subregister System (CHESS) replacement project.
ASIC claims that ASX’s announcements on February 10, 2022, stating that the project was “on-track for go-live” in April 2023 and “progressing well,” were misleading and deceptive.
The regulator argues that these statements implied the project was following ASX’s announced plan and was on course to meet future milestones.
The CHESS replacement project, which aimed to modernize the exchange’s 25-year-old clearing and settlement system using blockchain technology, was a significant undertaking for the exchange.
The exchange had been working on this initiative for seven years, intending to enhance its electronic securities trading processing capabilities.
However, the project faced unforeseen challenges and was ultimately shelved following an independent audit by Accenture that highlighted various issues.
In a statement issued on Wednesday, ASIC Chair Joe Longo said companies and market participants rely on what the ASX says about its operations to make their own decisions and investments.
“We expect the ASX to be a place to list and invest with confidence,” he said.
The regulator alleges that the true state of affairs on February 10, 2022, contradicted ASX’s announcement that the project was “progressing well.”
The subsequent delay and pause of the project in November 2022 reportedly caused significant costs to ASX and market participants who had relied on the exchange’s assurances.
The financial impact of the failed blockchain project has been substantial, with ASX reporting a pre-tax loss of approximately $170 million (AUD 255 million), which the company has written off.
This setback has raised concerns about Australia’s attractiveness as an investment market and the management of critical national infrastructure projects. ASIC has yet to determine the specific penalty it will seek for ASX’s alleged contraventions.
This legal action follows a recent penalty of $1,050,000 paid by ASX in March 2024 for compliance issues with market integrity rules.
Edited by Stacy Elliott.
