The ASX has released an incident review explaining why the Batch Settlement scheduled for 20 December had to be rescheduled to the following business day, attributing 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 said in a statement on Thursday.
In acknowledgment of the disruption, the ASX said it 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.
In a statement distributed to InvestorDaily, a spokesperson for the Australian Securities and Investments Commission (ASIC) said that the regulator is “deeply disappointed” by the incident and the impact it had on the market.
“ASIC is in regular contact with ASX and has underlined its expectations for the ongoing resilience, reliability, integrity and security of CHESS. All options are being considered for ASIC’s regulatory response to the incident,” the spokesperson said.
“ASIC is engaging with the RBA and stakeholders on the impact of the incident and lessons for the future.”
On the back of the ASX’s update, managing director and CEO Helen Lofthouse is understood to have sent a personal letter to customers to apologise for the incident.
“Not being able to complete Batch Settlement is unprecedented and we fully appreciate the seriousness of this matter. While the incident was successfully resolved such that the market could open normally on the next business day, this does not meet the high operating standards expected of ASX and which we expect of ourselves,” Lofthouse wrote.
“I wanted to write to customers directly to once again apologise for the incident and to assure them that we’ve taken steps to fix the issue and prevent reoccurrence.”
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.
