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Share market operator ASX Ltd (ASX: ASX) is planning to spend up to $320 million on the second stage of its troubled CHESS replacement program as the company announced cost increases for the first stage which is scheduled to be implemented in 2026.
The securities exchange operator, which first moved in 2017 to upgrade its decades-old share settlement system, has revealed that costs for the first stage of the replacement program are expected to be at the upper end of the forecast range of between $105 million to $125 million.
The second stage, to be implemented by 2029, is estimated to cost between $270 million and $320 million.
ASX is taking a staged approach to introducing its new system after its previous blockchain-based settlement project was abandoned in 2022 due to significant flaws identified by independent consultancy Accenture – a move that led to the market operator to book a $250 million write-down later that year.
In November 2023, ASX revealed that Tata Consultancy Services (TCS) would deliver the replacement system using its TCS BaNCS Market Infrastructure product, a modular technology platform for clearing and settlement services.
Accenture was chosen to partner in the CHESS replacement initiative due to the “scale and complexity” of the project.
The CHESS Release 1 scheduled for 2026 will involve clearing services, followed by Release 2 in 2029 involving settlement and sub-register services.
ASX says work is under way on both releases, with the company yet to select a cloud-based services operator for the new system.
The capital expenditure for Release 2 is expected to be incurred “over multiple years” which the company says reflects the “complexity, duration and number of stakeholders involved in the delivery of the settlement and sub-register services”.
“ASX continues to work towards 2026 for delivery of Release 1, with the estimated project costs currently expected to be up to $125 million, at the upper end of the previously communicated guidance range,” says ASX Ltd.
“ASX’s existing capital expenditure (CAPEX) guidance remains unchanged and includes allowances for both releases of the CHESS system, noting that expenditure for Release 2 will extend beyond the guidance period.”
ASX has affirmed its CAPEX guidance for FY25 to FY27 to range between $160 million and $180 million annually, with the aim of reducing this expenditure after FY27.
However, the stock exchange operator also notes there are “inherent delivery risks in the program” that could impact this guidance.
ASX says the 2029 target for CHESS Release 2 is expected to “allow time for industry preparation and readiness activities”.
“ASX also continues to consult and work with the industry to consider whether to adopt a shorter T+1 settlement cycle,” the company says.
“If there is to be a move to a shorter settlement cycle, ASX has received initial industry feedback that it should follow the implementation of the CHESS project.”
ASX also reveals that its $70 million partnership program, which is aimed at encouraging continued participation in the CHESS replacement program, has some $37 million yet to be disbursed as this is linked to future project milestones.
ASX CEO Helen Lofthouse says the securities market operator continues to “prioritise the safe delivery and reliability of the CHESS project”.
“Our technology modernisation program is part of our strategy to continue to build long-term shareholder value,” she says.
“The new CHESS system we are implementing is critical market infrastructure and we need to make the appropriate investment to ensure it can provide for the market today and into the future. As we progress this important project, we are continuing our investment for the effective and reliable operation of current CHESS.”
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