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ASX (ASX:ASX) share price rises on CHESS replacement update

The ASX Ltd (ASX:ASX) share price is up around 2% after the ASX operator announced what is going to replace CHESS.

The ASX Ltd (ASX: ASX) share price is up around 2% after the ASX operator announced what is going to replace CHESS.

ASX is the company that operates the Australian Securities Exchange. CHESS is currently the system used for share trading and ownership – the ASX tried to update it, but recently abandoned the project.

CHESS replacement chosen

ASX has completed its reassessment of the solution design to replace CHESS and will proceed with a solution to be delivered by global technology provider TATA Consultancy Services (TCS).

ASX will use the TCS BaNCS for market infrastructure product, which offers a “modular technology platform for clearing and settlement services.”

The ASX thinks that the chosen product will allow it to provide a “reliable, supportable and scalable platform that meets the needs of the Australian market now and into the future.” It’s “capable of supporting potential new services and innovation from ASX or other providers.”

It’s proposed that the first release will include the clearing service, and the settlement and sub-register services will follow in a second release. This staged approach is expected to “reduce overall delivery risk and should help manage impacts on industry stakeholders, as compared to a single cut-over approach.”

The current expected timeframe for implementation of the first release is 2026, with the second released possibly in 2028 or 2029.

ASX has entered into an agreement with Accenture to support its project delivery in the role of solution integrator. Accenture will provide additional capability and capacity in technology project delivery and industry expertise.

This will supposedly improve scalability.

How much will this cost?

ASX revealed that the estimated cost of the first release (clearing) of the overall project is expected to be between $105 million to $125 million, which will be incurred over multiple years, with the FY24 component of capital expenditure captured in ASX’s existing capex guidance. Added to the abandoned project, this has been costly for the company and ASX’s shares.

Management commentary

ASX Managing Director and CEO Helen Lofthouse said:

When we took the decision to reassess the CHESS replacement solution design, we wanted to select a solution that would serve the whole market, and to do that we needed extensive input from our customers and industry stakeholders. We significantly increased engagement during 2023 and the selected product, implementation approach and scope reflect discussion and feedback from various forums.

We had clear objectives for our selection process. These included meeting current and future market needs and our licence obligations, enabling a safe transition from the incumbent platform, minimising industry impacts where possible, and having the capability to provide interoperability and facilitate future innovation as driven by market demand.

This next phase of the project will be a multi-year undertaking and ASX will maintain our investment in the current CHESS platform to ensure it continues to operate efficiently and reliably until the replacement is implemented.

Final thoughts on ASX shares

It seems we’re going to be stuck with CHESS for some time. Hopefully this new project will be a good upgrade, come in on time and on budget, and it’s better than what we’ve already got.

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