Published on the 10/08/2022 | Written by Heather Wright

‘Blockchain first’ faces delays, review…

Once hailed as the world’s first industrial-scale blockchain case, the ASX’s Chess replacement project has again floundered, delayed once more in a move called ‘disappointing’ by both ASIC and the Reserve Bank of Australia, with Accenture called in to review the project.

“It is critical that Accenture now undertake this review to provide assurance on the delivery of a resilient replacement and a high degree of confidence in a revised go-live date.”

It’s the fifth delay for the AU$250 million project to replace the 25+ year old Cobol Chess (clearing house electronic subregister system) platform with a new offering build on Java and DAML (Digital Asset Modelling Language) smart contract development capability and VMware’s DLT blockchain platform. 

The new offering will, according to the ASX, ‘provide the option of accessing distributed ledger technology which will deliver information more efficiently and stimulate competition by enabling anyone to build new services’.

The plan for the distributed ledger system was announced in 2017 after two years of ‘considering the options’ and put the ASX at the bleeding edge of innovation.

The system would mark Australia as one of the first countries in the world to adopt DLT for a traditional exchange, though securities exchanges including the Nasdaq and London Stock Exchange are looking at possible blockchain options for order book settlements and clearances.

Initial plans for the ASX were for the bourse to host a central database, with exchange participants taking a node to the database, confirming instantly that their records matched those of the ASX.  

Technical implementation, however, appears to have been fraught for the ASX and its providers. 

Last week the ASX said it and application software provider, New York-based Digital Asset, had ‘identified that more development is required than previously anticipated to meet ASX’s scalability and resilience requirements for the application’.

“This is contributing to delays to the delivery of the remaining technical components of the application.”

It’s now not expected to go live before late 2024, four years after the initial planned end of 2020 go live, with technological setbacks, Covid and industry concern over a lack of consultation, all hampering the project over the years.

The announcement came just days after Helen Lofthouse took on the role of ASX managing director and CEO, taking over from Dominic Stevens.

She’s expressed support for the project, saying there has been ‘significant progress’ with the Chess replacement. 

That’s little comfort however, to the equity capital market participants who are reportedly increasingly angered at having to invest in software updates. 

News of the delay was accompanied by the announcement that Accenture has been called in to conduct an independent review of the new Chess application to identify shortcomings and help the ASX narrow down a go-live date ‘with confidence’.

The review will focus on the software provided by Digital Asset, who the ASX says ‘will work in cooperation with ASX and Accenture to complete the review’. The VMware blockchain platform and other infrastructure underpinning the system isn’t included in the review. 

Digital Asset, which raised US$120 million in Series D funding last year, has a hand in several stock exchange projects, including Hong Kong Exchanges and Clearing’s Synapse post-trade settlement platform (no mention was made of DTL) and Germany’s Deutsche Börse’s post trade platform.

Both ASIC and the RBA have applauded the announcement of a review of the system, to be carried out by Accenture, with RBA Governor Philip Lowe noting that the review is an important step in providing assurance that the new Chess application software will be fit for purpose. 

Adds ASIC chair Joseph Longo: “It is critical that Accenture now undertake this review to provide assurance on the delivery of a resilient replacement for Chess and a high degree of confidence in a revised go-live date.”

Of course, the ASX will be keen to avoid any repeat of its November 2020 full day outage caused by defects in a new system which brought the ASX’s entire system down and saw it slammed in an independent review, which cited extensive open defects, inadequate testing and poor governance. The report by IBM into that outage found ‘gaps in rigour’ across risk management, project delivery, testing and incident management. 

In September 2021 the RBA advised that the ASX should identify and carry across findings that are relevant to the Chess replacement project and recommended the application of findings be subject to an independent external review. 

Accenture’s review is expected to be completed over the coming three months, with the results to be publicly released. 

Meanwhile, the project’s former title of the world’s first actual industrial-scale blockchain case is now instead that of the most costly, longest running blockchain project.