In a market update on Monday, ASX confirmed it has been notified by the Australian Securities and Investments Commission (ASIC) that it has commenced an investigation into the CHESS Batch Settlement incident that occurred in December.
“ASX takes its regulatory obligations seriously and will cooperate fully with ASIC,” the market operator said.
The news comes after ASX in January released an incident review explaining why the Batch Settlement scheduled for 20 December had to be rescheduled to the following business day.
In a statement distributed to InvestorDaily in January, an ASIC spokesperson said the regulator was “deeply disappointed” by the incident and the impact it had on the market, adding that “all options” were being considered for its regulatory response.
“ASIC is in regular contact with ASX and has underlined its expectations for the ongoing resilience, reliability, integrity and security of CHESS,” the spokesperson said.
“ASIC is engaging with the RBA and stakeholders on the impact of the incident and lessons for the future.”
In releasing its review of the incident last month, ASX attributed the issue to a “combination of events” isolated to an area of CHESS responsible for calculating memory allocation for the settlement processes.
“There were specific circumstances in December 2024 that triggered the incident but the root cause can be traced back to an error that was introduced in 2014 to the memory allocation logic which resulted in the Batch Settlement process not being able to complete,” it clarified in January.
In acknowledgment of the disruption, ASX is committing a $1 million credit to settlement participants but insisted that both the nature of the issue and how it arose were “highly irregular”.
The exchange highlighted the absence of prior records of incidents caused by this part of the system, or of CHESS failing to complete Batch Settlement on a designated settlement day.
The ASX has been in hot water over its CHESS replacement project for well over a year, with both ASIC and the Reserve Bank exerting pressure on the stock exchange to press on with the project, before the corporate regulator launches a lawsuit against the ASX over the matter in August.
In August, the ASX also released a consultation proposing that the replacement of CHESS be divided into two main phases, with Release 1 focusing on clearing services and Release 2 covering settlement and sub-register services.
The market operator anticipates that the CHESS Release 2 implementation, slated for 2029, will cost between $270 million and $320 million. It is also progressing towards the delivery of Release 1 in 2026, with estimated project costs now expected to be at the “upper end” of ASX’s previous estimate of $105 million to $125 million.
