Checkmate! ASX

Slack Investor is all about “continuous improvement” Obviously not me … but everybody else! I normally have low expectations of “clip the ticket”, almost monopoly, systems such as the Australian Stock Exchange (ASX) as there is little incentive for improvement – they are going to get there cut anyway. Last year, I did get off the couch briefly to have a bit of a rant about ASX Paper …I’m Drowning!‘ But I did end the blog on a hopeful note, that system change was just around the corner with a new “blockchain” based system to replace the Clearing House Electronic Sub-register System of the ASX (CHESS).

After reporting five delays on the CHESS replacement project, the ASX has just announced a move to drop the whole project – that it has been thinking about since 2005. In a damning review of the ASX’s handling of the project by Accenture, that has been described by business leaders as “embarrassing”. There are now undermined expectations that the ASX can ever deliver on any new market infrastructure with its current board and management.

The project, which has dragged on for seven years, will now be “reassessed”, the ASX stated in a media release this morning, with the abandoned software being “derecognised” at a gross cost of $245 million to $255 million.

Tahn Sharpe – The Inside Adviser

Although the structure of the current CHESS system is not broken, there are a lot of things that should be fixed.

• Start with clearing up the confusion between Issuer Sponsored (SRN) and Broker Sponsored (HIN) Shares – Just have one type of sponsorship.
• Stop sending reams of letters – including the unnecessary posting of CHESS holding statements.
• Move towards T + 1 settlement (currently ASX settlement is 2 days). US exchanges have T + 1 scheduled for 2024.
• Look at ways to shave off a few layers of fees. Currently ASX fees are paid to registries, fund administrators, wealth platforms and custodians.

The underlying software that runs CHESS was a legacy gift from the NASDAQ exchange (i.e. Cost = $0). It is starting to creak a bit though, as it was written over 22 years ago in COBOL. Slack Investor was hoping that the new system would improve on the layers of fee-charging “ticket clippers” that are in the current system – but it seems that the vested interests still have the ear of the ASX.

… the reality is that the CHESS replacement looks more like a replication of all the old systems with its layers of fees being paid to half a dozen different players.

Chanticleer – afr.com

Instead of being the first National Stock Exchange to try use the blockchain technology, perhaps the ASX could wait and see whether other exchanges can bed down this new “distributed ledger “technology – then adapt their systems. After all, using market value, our exchange represents under 2% of the world’s companies.

But what would Slack Investor know? – he is only a punter. In the meantime, streamline the current CHESS system – make it better. Whatever we do … it should cost less than $250 million!