Failed blockchain project ends with big fine for fibs about it being on track

Software

A final humiliation for Australia’s Securities Exchange and its attempts to run a bourse on distributed ledgers

The attempt by Australia’s Securities Exchange (ASX) to replace its core trading platform with a blockchain-based system has ended with an A$20.5 million fine ($14.2 million/£10.6 million), further humiliation after the project flopped.

The ASX runs a platform called the Clearing House Electronic Subregister System (CHESS) to process and track trades on its exchange. In 2017, the ASX decided to replace CHESS, citing difficulties maintaining the application, which the bourse coded in COBOL and ran in OpenVMS on Itanium processors.

The ASX is a listed company so its own shares trade on CHESS.

The organization decided to replace CHESS with blockchain-based architecture. As explained in its 2019 annual report [PDF], the ASX believed its decision would help it “develop new services that improve the efficiency and standardisation of processes, reduce operational risk, and create new opportunities for growth and innovation.”

That optimism was utterly misplaced because the project foundered and missed deadline after deadline.

But in February 2022, the ASX issued a statement [PDF] in which it described the project as “progressing well, with the fully integrated industry test environment open and operating successfully.”

In the months that followed, the organization issued a string of statements about difficulties with the project and expected deployment delays. The ASX ended up abandoning the project.

In 2024, financial regulator the Australian Securities and Investments Commission (ASIC) sued, alleging that claim all was well with the CHESS replacement was a misleading statement. The regulator argued that as both the market operator, and a listed company itself, any misleading statements from ASX had the potential to undermine confidence in the entire Australian securities market.

ASX and ASIC settled the matter in June, and the bourse admitted [PDF] to having misled investors.

Australia’s Federal Court today handed down its judgement in the matter, noted that the ASX admitted its errors, but still ordered the bourse pay the A$20.5 million fine, plus ASIC’s A$3 million ($2.1 million/£1.55 million) costs.

A parliamentary report [PDF] on the project found three reasons why it failed. One was that the ASX didn’t properly define its objectives. Another was that the company kept adding new requirements but started building the CHESS replacement anyway, meaning the planning and deployment phases of the project overlapped.

The report also found “scalability risks were not properly identified and managed; with the result that it was never clear whether the proposed blockchain technology could in fact adequately replace the existing CHESS system.”

Those problems weren’t apparent to the outside world, where the Blockchain community regarded the ASX’s decision as a sign distributed ledger technology was suitable for even the mission-critical role of running a stock exchange.

The Register offers that assessment based on this account of AWS investigating whether it should get into the blockchain business. The author, a former AWS exec, explains how he was sent to Wall Street to research Blockchain, and often heard the opinion that the ASX’s project meant the technology must have merit.

AWS did not become a major blockchain player. And the ASX clearly regrets making the attempt. ®