SYDNEY : In a Sydney hotel conference room in May, Tim Hogben, the head of securities and payments for ASX Ltd, which runs the Australian stock exchange, told traders, share registry operators and clearing house representatives what they were hoping to hear.
More than a dozen brokers, other market participants and people directly involved in the blockchain project told Reuters the failure had shaken trust in the Australian exchange operator. Some expressed dismay over the time and costs they contributed to the doomed endeavour and ASX's repeat assurances that all was well with the upgrade, which had faced five delays since an initially scheduled 2020 launch.
An ASX spokesperson told Reuters in an email that the company gave project updates based on the latest available information and some challenges"only became apparent as we reached the latter stages".ASX's quest to replace its platform that facilitates trades — known as CHESS, for Clearing House Electronic Subregister System — began under then-CEO Elmer Funke Kupper in 2015, when there was global fascination with cryptocurrency and blockchain.
People working on the project raised concerns that Digital Asset lacked after-market support and that the ASX had enlisted the company without testing its product for scalability, the person said, adding that the worries went unaddressed. Ultimately, ASX had 300 people working on the CHESS replacement project, about one-third of its headcount.
Yet by seeking to replicate all CHESS functions on a single system, ASX risked undermining an advantage of blockchain, which was to reduce contact points that slow processing, people involved in the project said. "Clear requirements, alignment on the objectives and manageable milestones with defined success criteria are paramount," it said.
Morgan Stanley analysts cut their valuation of ASX shares by 10 per cent, citing strategic uncertainties. The RBA and ASIC have said they expect ASX to cover industry write-downs associated with the failure. The ASX spokesperson said the company was"very aware of the investment customers and other stakeholders have made already we will bear this in mind as we consider what work can be leveraged into a new solution".