The Australian Securities Exchange (ASX) has pushed back the launch date for its long-slated CHESS replacement by another year following requests from industry for more testing time.

The delayed launch will allow for “[increased] project scope” and extra system testing time for Covid-impacted businesses readying to join the platform, the ASX said.

In February this year, the ASX announced its new post-trade system would be ready for industry-wide testing by July, with a fully functional platform set for launch by April 2021.

However, in consideration of the pandemic and likely hitches in industry’s preparations to join the platform, the ASX pushed its go-live date back to April 2022.

Following its most recent industry consultation, the ASX revised its target launch date to April 2023.

ASX chief executive Dominic Stevens admitted the “functional scope, capacity, scalability and testing of the CHESS replacement system… is greater” than originally anticipated.

Taking a less hurried, risk-averse approach, Stevens said the revised timeline “captures the increased requirements of ASX and the industry and lowers the risk in delivering them”.

The Clearing House Electronic Sub-register System, or CHESS, the ASX’s quarter-of-a-century old clearing and settlement system, is set to be replaced with a new blockchain-based system built on Java and DAML – the Digital Asset Modelling Language, a globally adopted industry standard for over-the-counter (OTC) derivatives trading platforms.

The new system has been touted as the world’s first industrial-scale use case for distributed ledger technology, otherwise known as blockchain.

The long-awaited CHESS replacement has promised to provide issuers and end investors greater control over market activities through “timely, secure and simplified access to the register of holders (for issuers), financial assets (end investors) and associated information”.

“It enables the industry to meet and respond to changing local and global markets, and promote further innovation through new levels of functionality, open standards and flexible technology,” the ASX said in briefing documents.

While stressing that “most CHESS users indicated they could meet the proposed go-live date of April 2022”, the ASX acknowledged the significant impact of the Covid pandemic on the industry’s readiness to hook into its new post-trade system.

A significant portion of stakeholders requested extra time for testing, the ASX said, as well as additional functionality in the new system “to reduce manual processes (such as electronic corporate action elections)”.

Covid-19 continues to have an impact “on collaboration and productivity, the importance of digitising processes and the need to further reduce cutover risk to the new CHESS system”.

“ASX has listened to the industry, regulators and its technology partners throughout this project.  It is clear that Covid-19 continues to impact the whole industry, including ASX, and this has evolved what our stakeholders want from the CHESS replacement system,” Stevens said.

“In parallel, ASX has considered how we can reduce delivery risk, enhance the customer experience and continuously improve project execution. Consequently, we have increased the scope of the project and extended the timeline. The result is a program that provides a significantly enhanced CHESS replacement solution on Day 1.”

The ASX noted that, following an “unprecedented ‘bursting’ of daily trade volumes” during Covid, the industry has also requested substantially more post-trade processing capacity than had been contemplated pre-Covid-19.

According to the stock exchange, additional trades in early March eclipsed previous records by approximately 3.5 million trades, compared to historical bursts of less than 0.5 million trades.

“As a result, ASX has adjusted the Day 1 scope and schedule for the CHESS replacement system to target significantly more throughput capacity and scalability, more functionality, more industry testing, and more time for users and ASX to prepare.”

“[Replacing] CHESS is an important and innovative project, with significant long-term benefits for Australia’s financial market users,” Stevens said.

“It is ASX’s responsibility to deliver it in a safe and timely manner, and to consider the feedback from all our stakeholders.”