ASX to pay $23m, admits misrepresentation over CHESS replacement

ASX has admitted that it misled and exposed market participants to financial risk in an announcement related to the delivery of the CHESS replacement project in early 2022, despite realising the delay would occur as early as 21 December 2021.

According to ASX's announcement in February 2022, the Clearing House Electronic Subregister System (CHESS) replacement project was "progressing well" to go live on the scheduled date of April 2023. However, a month later the ASX U-turned from the initial announcement, disclosing there was a strong likelihood the project would be delayed.

In November the same year, ASX paused the project and derecognised approximately $245-$255 million of its own project costs. Further, the project was internally classified 'red', indicating significant unresolved issues or risks, ASIC said.

A year later, ASX announced a new CHESS replacement solution would be delivered in two releases, with clearing services in Release 1 and settlement and subregister services in Release 2. Release 1 went live on 20 April 2026.

ASIC commenced civil penalty proceedings in the Federal Court against ASX in August 2024, alleging it made the now admitted misleading statements.

By admission, ASX acknowledged it contravened sections 12DA and 12DB(1)(a) and (e) of the Australian Securities and Investments Commission Act 2001 (Cth).

As a result, both parties will ask the court to impose a penalty of $20.5 million, and order ASX to pay $3 million towards ASIC's costs.

Commenting, ASIC chair Sarah Court said ASX's statement risked undermining confidence in Australia's financial markets.

"ASX has admitted to making a misleading statement in relation to critical market infrastructure at the centre of Australia's financial system," Court said.

"These admissions concern the accuracy of disclosures to the market about a significant and complex project that carried real consequences for confidence, planning, and investment across the market.

"Accurate and timely disclosures are fundamental to maintaining trust in Australia's financial markets, particularly from entities that operate core market infrastructure."

ASX chair David Clarke apologised for the shortfall in this matter and recognised the magnitude of the misleading statements.

"When we stopped the CHESS project in November 2022 to reassess our whole approach, that tested market confidence in ASX and called into question the nature of statements previously made," Clarke said.

"As the market operator and a steward of critical market infrastructure, our words matter. I am sorry ASX fell short. We recognise the impact this has on trust and confidence, and we take responsibility for the lessons that must be learned from that experience."

He added that the project is now on "firmer footing" and highlighted the decision to settle the matter reflects the desire to focus on future developments.

"We will continue the reset across the group, informed by the findings of the ASIC Inquiry report delivered earlier this year," he said.

Interim chief executive Darren Yip said CHESS remains a "critical priority", and the successful delivery of Release 1 is a step in the right direction.

"Since go-live of Release 1, CHESS has continued to perform strongly, consistently processing elevated trading volumes during periods of heightened global market volatility - underscoring its resilience and scalability," Yip said.

"The significant investments we are making in our technology modernisation program remain a core focus for ASX."

The amount will be provisioned in FY25 as a non-recurring significant item, ASX confirmed.

Since these events, ASIC has obtained commitments from ASX to strengthen oversight, governance and delivery of the CHESS replacement program.