Several years ago the Australian Stock Exchange (ASX) sought out to update its aging CHESS or Clearing House Electronic Subregister System, using blockchain technology. While the thought process may have made sense but the execution was lacking to the point that Australian Securities and Investment Commission (ASIC) pursued an enforcement action.
In November of 2022, ASX paused the project and wrote off approximately $245-$255 million (pre-tax) in its own project costs.
According to ASIC, ASX must now pay a $20.5 million penalty for claiming the project was proceeding well when it actually wasn’t thus introducing market participants to financial harm. In February of 2022, ASX admitting its shortfall and now a Federal Court has assessed the fine. ASX was also ordered to pay $3 million toward ASIC’s costs.
ASIC Chair Sarah Court says the penalty represents the seriousness of the transgression about a project that is central to the Australian 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 affect confidence, investment and decision-making across the market. For market operators, that responsibility is even greater, given their role in maintaining critical market infrastructure and ensuring confidence in Australia’s financial system,” stated Court.
Justice Markovic who oversaw the legal proceedings said that ASX as the gatekeeper to market integrity and confidence it should have been more transparent and accurate in its assessment, setting a benchmark for others.
ASX eventually pursued an updated system to replace CHESS in two phases with the first being completed this past April. While the new system does not use blockchain technology it is expected to allow to support technologies like a distributed ledger.