Govt urged to take ASX out of CHESS replacement equation

Mike Taylor

Managing Editor/Publisher, Financial Newswire

5 April 2023

The ability of the Australian Securities Exchange (ASX) to competently deliver on a CHESS replacement has been openly questioned by a competitor in the space, FinClear Holdings, in a cutting submission filed with a key Parliamentary committee.

FinClear has claimed that there are now three options open to regulators in dealing with the CHESS replacement exercise and each of those options involve looking to providers other than the ASX.

Indeed FinClear has gone so far as to recommend that the Council of Financial Regulators step in and redesign the approach (instead of the ASX).

“We believe that there are three options open to regulators at this critical junction:

1. Continuing with the current process, understanding CHESS as it stands is critical infrastructure and must be upgraded to more contemporary architecture to continue servicing the industry for many years and not just at the point of delivery, whenever that might be. Concurrent to this there is an opportunity and a need for regulatory settings to be reformed to promote greater competition. Whilst this approach would (if executed well) at least ensure continued functionality, regrettably it would not support or deliver innovation.
2. Conclude that the ASX, both from a competency and competition perspective, is unable to deliver and maintain the current capability and must transition to a different operating model where industry participants jointly own and operate this capability as a utility to service all. FinClear stands ready in its capacity as trusted counterpart across the industry to assist in such a process.
3. Adjust current regulatory settings to promote innovation and competition via alternate capabilities and encourage direct participation from leading alternate providers with a view to diversifying risk away from a single monopolistic provider. This approach is already being successfully implemented by many international jurisdictions.

The FinClear submission said that it saw option 3 as the preferred option because “naturally diversifies risk away from a single point of concentration and is a way for regulators to ensure the Australian market remains competitive, ensuring there is continued inward investment and a reduction of charges and fees that impact all Australians (through their super funds).