Despite its best intentions of starting the new trading year with technical issues that plagued the ASX (ASX: ASX) in 2024 behind it, the market operator is yet again confronting fresh glitches which are making market participants jittery about ongoing delays this year.
The ASX’s systems update this morning that undisclosed issues within its before business report to Austraclear – which settles approximately $100 billion worth of transactions per day - had been resolved hinted that the issues plaguing pre-Christmas trading may not be behind it.
Fortunately, with many investors waiting for key economic data next week – notably the release of consumer price index (CPI) data and retail sales figures – trading volumes today remain in holiday mode.
Recent antics on the ASX, on the cusp of Christmas, had serious implications for some brokers; collectively they were left having to find an estimated $3 billion for trades yet to settle. Much of the short-term funding issue relates to brokers having paid all their clients with their own funds despite not being paid by the ASX.
As the central clearing participant (CCP) for all Australian stock markets, the bourse is required to settle equity trades on what’s known as T+2 — a two-day delay after execution. However, due to technical issues with its batch settlement system, CHESS, the ASX warned that settlements for trades made on the Wednesday would be delayed until Monday at the earliest of the following week.
Based on a review of the incident compiled by the ASX, the regulator, Australian Securities and Investments Commission (ASIC) and The Reserve Bank will decide whether any action needs to be taken.
Whitefield Capital Management managing director Angus Gluskie described the pre-Christmas outage – the worst since the ASX trading system collapsed for a single day in November 2020 - as a palpable concern for the market.
“It is obviously vital to have this fundamental infrastructure operating at all times,” Gluskie told The Australian Financial Review. “It needs to have a complete failsafe to facilitate the functioning operation of the market."
“It’s really essential to make sure the basic infrastructure is modern and functional, and that requires periodic overhauls.”
The root cause of settlement delays is the CHESS system’s aging legacy COBAL coding language which the ASX has struggled to fix. Attempts by the ASX to replace its 31-year-old settlement system have not gone well.
The regulator ASIC is currently suing the company for failing to flag investors that it would be writing off $250 million on a replacement CHESS it knew was going to fail.
Late November, the ASX chief executive Helen Lofthouse prepped the market to expect possible delays on the 2026 start for its CHESS program and reiterated the expected delivery of its CHESS Release implementation in 2029.
As a top 50 ASX stock, the ASX has seriously underperformed its sector peers with the stock's share price up 4.2% over one year.