ASX has announced it will delay the launch date for its world-first, blockchain-backed CHESS replacement, giving market participants time to cope with volatility wrought by the coronavirus crisis.
The decision, it said, also takes into consideration user feedback on scheduling, requested functionality changes, and the ASX’s need to complete aspects of its own readiness – issues raised prior to the Covid-19 pandemic.
As a result, in June this year, the ASX will hold consultations with users to replan the project implementation timeline and, crucially, to determine when best to recast the initial April 2021 go-live date.
“We are conscious of the importance of providing a new schedule, and the need to get the valuable input of CHESS users,” said Peter Hiom, deputy chief executive of the ASX.
“Right now, however, in this environment of heightened volatility and activity levels, the industry needs to focus on day-to-day operations,” Hiom added, acknowledging the market’s inability to predict the full extent of Covid-19.
The Clearing House Electronic Subregister System, or CHESS, is the ASX’s long-serving platform to manage clearing and settlement of share transactions as well as the recording of shareholdings for listed companies. The platform has been in operation for more than a quarter of a century.
With a significant proportion of financial services staff – including the ASX, where an employee recently tested positive for novel coronavirus – working remotely, it remains to be seen when organisations could feasibly “participate in coordinated readiness activities”.
The ASX is, however, expected to go ahead with its July 2020 launch of its Industry Test Environment (ITE), which will enable back-office software developers to complete their connectivity, testing and readiness activities with the replacement system.
Where timelines are concerned, the securities exchange still hopes to open the ITE to all users in October 2020, with technical accreditation for market participants set to commence by end-January 2021 – albeit both dates being subject to feedback from June consultations.
The ASX is further extending its submissions period for rule changes to Tranche 2 – the second of three tranches of operating rule amendments; this one relating to corporate actions, mFund, and RTGS payment aspects for ‘Day 1’ system implementation – from 3 April to 29 May 2020, and will finalise the new timeline for Tranche 3 in June.
Arguably the largest-scale application of distributed ledger technology, or blockchain, in the financial world, the ASX’s CHESS replacement – dubbed a “once-in-a-generation” technology platform overhaul – is being closely watched across the globe.
“ASX remains fully committed to CHESS replacement,” Hiom stressed, highlighting that market efficiencies created by the new system would bring long-term benefits not only to Australia’s financial services sector but also the wider economy.
RBA, APRA put initiatives on hold
Meanwhile, virus-induced volatility has driven the Reserve Bank of Australia to postpone its Review of Retail Payments Regulation, which was expected to be completed by late 2020. Instead, the review will now likely conclude in 2021.
In the same vein, APRA has suspended most planned policy and supervisory initiatives for 2020, as well as its working program to replace APRA’s Direct to APRA (D2A) data collection tool with APRA Connect. Instead, it has advised regulated firms to devote resources to mitigating the fallout of Covid-19.