ASX CHESS Settlement
ASX Admits Misleading CHESS Project Update, Settling ASIC Proceedings With $20.5 Million Penalty
Anonymous
Key Points
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ASX’s own project status before the Feb. 2022 announcement was far worse than publicly presented: internal teams had classified the replacement as “red” in December 2021, citing “severe unresolved risks,” “reduced testing functionality,” and “blown-out timelines” that made an April 2023 launch impossible.
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The CHESS replacement delays were also flagged internally to the market ahead of the eventual pause: a March 2022 disclosure from ASX finally warned there was a “strong likelihood” of delays before the project was paused and ASX later wrote off between “$245 million and $255 million” in pre-tax costs.
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ASIC Chair Sarah Court said the case was about more than technical accuracy—she argued the admissions relate to “real consequences for confidence, planning, and investment across the market,” and warned that “misinformation risked undermining confidence across Australia’s financial markets and exposed participants to genuine financial harm.”
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ASX attributed the settlement decision to restoring confidence and reframing priorities, with management saying, “I am sorry ASX fell short,” and that after stopping the CHESS project in November 2022 to “reassess our whole approach,” it “tested market confidence” and that the project is now “on firmer footing.”
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The timing of the resolution was abrupt: the settlement was agreed “hours before a trial was due to begin,” with ASX and ASIC then seeking Federal Court approval for the deal.
Hours before a trial was set to begin, ASX agreed to pay a $20.5 million penalty to settle civil proceedings brought by Australia's corporate regulator over its failed CHESS replacement project, according to Business News Australia. The exchange operator admitted that a February 2022 market announcement — claiming the project was "progressing well" — was misleading, even as internal teams had already flagged the project as "red" with "severe unresolved risks."
The settlement, which still requires Federal Court approval, also requires ASX to pay $3 million toward ASIC's legal costs. ASIC dropped two other misleading-statement allegations as part of the deal, FX News Group reported. The penalty and costs are expected to be treated as one-off items in ASX's FY26 accounts.
Internal 'Red' Flags Contradicted ASX's Public Story
While ASX told the market in February 2022 that CHESS replacement was "on track" for an April 2023 launch, its own project teams had already classified the project as "red" in December 2021. Internal records cited in ASIC court filings described "severe unresolved risks," "reduced testing functionality," and "blown-out timelines" that made the target date impossible, according to Australian Financial Review.
By March 2022 — just weeks after the upbeat announcement — ASX reversed course. It warned of a "strong likelihood" of delays. Then in November 2022, following an independent review by Accenture, ASX paused the project entirely. Accenture found the software was only 63% complete. ASX wrote off between $245 million and $255 million in pre-tax project costs.
ASIC Says Misleading Disclosure Put Markets at Real Risk
ASIC's Sarah Court said the case went far beyond a technical wording dispute. "This was about real consequences for confidence, planning, and investment across the market," she said. "Misinformation risked undermining confidence across Australia's financial markets and exposed participants to genuine financial harm." ASIC framed the settlement as a deterrent to other infrastructure providers, according to Grafa.
Institutional investors and major banks, including CBA and Macquarie, spent hundreds of millions of dollars preparing their own systems for a DLT-based transition that never happened. Industry groups argue the $20.5 million fine is "pocket change" compared to the collective costs borne by market participants, Kalkine Media reported.
ASX CEO Apologizes and Points to a Fresh Start
ASX Managing Director and CEO Helen Lofthouse, who took the role in August 2022 after the project was already in trouble, issued a direct apology. "I am sorry ASX fell short," she said. She added that stopping the project was "necessary to reassess our approach" and that the exchange is now on "firmer footing," according to Business News Australia.
ASX has since dropped its blockchain ambitions entirely. It is now working with Tata Consultancy Services on a more traditional software solution. The full replacement is expected to roll out in two stages — covering clearing and then settlement — through 2026 to 2029. The original CHESS system, launched in 1994, remains in use today.
Last-Minute Deal Sets Precedent for Project Disclosures
The settlement was struck just hours before the trial was due to begin, giving both sides an exit from what could have been a lengthy and costly court battle. By admitting to one charge and having two others dropped, ASX cleared its legal slate, according to FX News Group. ASIC, in turn, locked in a public admission without the risk of losing at trial.
The outcome puts every ASX-listed company on notice. Regulators now have a clear precedent: "red" internal project ratings cannot coexist with "green" public market updates. The Federal Government has also moved to give ASIC and the Reserve Bank new "step-in powers" over critical market infrastructure, signaling that the regulatory landscape around market operators has shifted permanently.
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