ASX has today published a public consultation paper proposing to implement CHESS’s replacement settlement and sub-registry services in 2029.
The paper is the second of two consultations the ASX is conducting this year to gather industry feedback on the scope and implementation of the Australian Cash Equities Clearing and Settlement System (CHESS) replacement project.
Also today, ASX published its summary of feedback to the industry white paper published in April, which sought input on a possible move to shorten the settlement cycle from T+2 to T+1.
Taken together, these documents underline the ongoing stakeholder engagement that ASX has undertaken to ensure it continues to work closely with industry in the delivery of CHESS replacement.
ASX Group Executive Securities & Payments Clive Triance said: “Our commitment to transparent and collaborative advice is central to the success of the CHESS replacement project, as well as Australia’s approach to T+1.”
“The proposal to implement the CHESS replacement in two major versions reflects how we have listened to industry feedback. The phased implementation approach, whereby we will initially provide clearing services in Release 1, followed by the provision of settlement, sub-registry and additional clearing enhancements in Release 2, is designed to manage multiple factors, including a significant reduction in the Delivery risk and ensuring industry readiness. ”
Stakeholder input provided through working groups and other forums has been incorporated into the consultation paper published today and is reflected as part of the functionality of Release 2. Industry improvements outlined in the consultation paper include items such as continuous netting, account segregation and corporate elections.
Responses to the industry white paper on T+1 implementation were also an important contribution to the consultation paper and helped inform the proposed sequence of CHESS replacement implementation phases and the possible transition to T+1.
“Most industry responses indicate that there is a clear preference to avoid implementing T+1 concurrently with Release 2 of the CHESS replacement,” Mr. Triance said.
“Given the feedback on the industry white paper and taking into account the experience of moving to T+1 in other markets, we have presented a number of options for the timetable for moving to T+1 in Australia and outlined the risks and benefits of each of options.”
If a decision is made to move to T+1, the paper recommends the option that this would occur at an appropriate time after the implementation of the CHESS replacement Release 2.
ASX confirmed in June that delivery of Release 1 was expected to take place in the first half of 2026. This consultation paper proposes that Release 2 will be delivered in 2029, which is in line with the previously communicated indicative timeframes.
Next steps in the consultation process
We welcome feedback from CHESS users and software providers (including external providers and CHESS users developing internal systems), as well as other interested stakeholders, on the proposals set out in the consultation paper.
ASX is seeking feedback from stakeholders by Friday 13 September 2024. ASX will then take time to consider the submissions and propose to deliver a consultation response paper in the fourth quarter of 2024.
The full consultation paper can be accessed via the ASX public consultation website. Previous information about the CHESS replacement project can be found on the dedicated CHESS replacement webpage. A summary of the feedback on the T+1 white paper can be found on the dedicated T+1 website. The proposals set out in the consultation paper are based on ongoing industry engagement with the CHESS Replacement Technical Committee and its working groups, the ASX Business Committee and the T+1 Working Group.
background
CHESS is the clearing and settlement system for the Australian cash equity market. ASX is undertaking a project to replace CHESS and announced in November 2023 that it would proceed with a product-based solution design for the replacement of CHESS, provided by global technology provider TATA Consultancy Services (TCS).
