ASX Limited (ASX) has admitted that its 10 February 2022 market announcement which stated that the CHESS replacement project was "progressing well" was misleading and exposed market participants to the risk of financial harm.
ASIC and ASX will ask the Federal Court to find that ASX contravened the law, impose a penalty of $20.5 million, and order ASX to pay $3 million towards ASIC's costs.
The proposed resolution is subject to the approval of the Federal Court. It is a matter for the Court to determine whether the proposed orders are appropriate and whether any other orders should be made.
ASX has admitted that:
- as at 21 December 2021 the CHESS replacement project was not on its critical path to 'go live' in April 2023 and needed to return to it;
- between then and the 10 February 2022 announcement, the project was internally classified 'red', indicating significant unresolved issues or risks; and
- industry test environments had opened, and were planned to open, with reduced scope and performance, while timelines for incomplete work had been pushed out.
Despite this, ASX told the market on 10 February 2022 that the project was "progressing well", a statement it now admits was misleading.
About six weeks later, on 28 March 2022, ASX announced there was a strong likelihood the project's go-live date would be delayed. It later paused the project and derecognised pre-tax project costs of approximately $245-255 million.
ASIC Chair Sarah Court said ASX's statement risked undermining confidence in Australia's financial markets.
'ASX has admitted to making a misleading statement in relation to critical market infrastructure at the centre of Australia's financial system.
'These admissions concern the accuracy of disclosures to the market about a significant and complex project that carried real consequences for confidence, planning, and investment across the market.
'Accurate and timely disclosures are fundamental to maintaining trust in Australia's financial markets, particularly from entities that operate core market infrastructure,' the Chair said.
Since these events, ASIC has obtained commitments from ASX to strengthen oversight, governance and delivery of the CHESS replacement program.
Those measures are intended to support confidence in the operation and future development of Australia's critical market infrastructure.
It is a matter for the Federal Court to determine whether the proposed orders are appropriate and to make other orders. ASIC will issue a further media release when orders are made.
Background
On 13 August 2024, ASIC commenced civil penalty proceedings in the Federal Court against ASX alleging it made misleading statements about the CHESS replacement project in market announcements (24-177MR).
ASX has admitted that, by making the misleading statement that the CHESS replacement project was 'progressing well', it contravened sections 12DA and 12DB(1)(a) and (e) of the Australian Securities and Investments Commission Act 2001 (Cth).
The CHESS replacement project was a critical infrastructure program for the development of a system to replace the Clearing House Electronic Subregister System (CHESS) operated by ASX, with a new system using distributed ledger technology.
ASX commenced the project in 2016-17 and planned for it to 'go live' in April 2023.
On 28 March 2022, about six weeks after telling the market the project was "progressing well", ASX announced there was a strong likelihood the project would be delayed.
On 17 November 2022, ASX paused the project and derecognised approximately $245-$255 million (pre-tax) in its own project costs.
In November 2023, ASX announced a new CHESS replacement solution would be delivered in two releases, with clearing services in Release 1 and settlement and subregister services in Release 2. Release 1 went live on 20 April 2026.
