Stakeholder engagement

On 18 February 2021, ASX released its consultation paper on CHESS Replacement: Proposed changes to netting and settlement workflow. The consultation paper outlines proposed changes to the design of both the netting and settlement confirmation workflows to deliver processing efficiencies and reduce subsequent messaging volumes as part of the overnight end-of-day process and daily batch settlement.

The proposed changes will allow the CHESS replacement system to support clearing and settlement of significantly greater trading volumes and are largely in response to the extreme record trading activity in March 2020, which redefined the Day 1 capacity requirements of the replacement system.

Clearing and settlement and settlement only participants, software providers and approved market operators are expected to be impacted by the proposed changes.

ASX is seeking the following feedback from impacted stakeholders on the proposed changes to netting and settlement workflows: 

1. For impacted participants, what impacts do the proposed changes have on your overall business processes, operations, and systems (e.g. cessation of NBO, introduction of NNDP, and/or the settlement confirmation changes)?
2. For impacted participants and software providers (third party vendors and those developing in-house), can the proposed solution design be enhanced or supplemented to assist with the implications of the proposed changes for existing business processes, operations and systems? 
3. For impacted participants and software providers, what impacts do the proposed changes have on your organisation’s technical readiness activities for accreditation commencing from late April 2022 and/or operational readiness activities commencing from September 2022?
4. For AMOs, do you see benefit in allowing for trade cancellation after trade date for trades executed on your market? 

The consultation period closed on 18 March 2021.

ASX will consider all feedback with an aim to publish the functional specifications and messaging requirements relevant to the proposed changes at the end of March 2021.  ASX intends to release a formal response to consultation feedback ahead of the functional code release planned for end June 2021.

2020 Consultation on the CHESS Replacement Revised Implementation Timeline

On 30 June 2020, ASX released its consultation paper on the CHESS Replacement Revised Implementation Timetable. The paper set out key project activities and milestones including system development and testing, user testing, technical accreditation, operational readiness and operating rule amendments. 

Feedback was sought from CHESS users on their ability to meet a revised implementation timetable produced by ASX, with a new go-live date of April 2022 (12 months beyond the original target go-live) to:

• provide additional time for the ongoing impact of the COVID-19 pandemic on all stakeholders;
• accommodate functionality changes requested by users; and
• have a longer period for ASX and CHESS users to complete their respective development and readiness activities. 

The consultation period closed on 28 July 2020 and ASX issued a media release with early observations on 5 August 2020. 

On 28 October 2020, ASX released its response to consultation feedback on the CHESS Replacement Revised Implementation Timetable. The paper includes a summary of the responses received from 100 organisations and confirms the new go-live date as April 2023. It also involved engagement with regulatory agencies, detailed discussions with our technology partners and completion of a comprehensive project review. 

A copy of ASX’s media release can be found here. 

ASX needs to make rule amendments to facilitate the implementation of the new system that will replace CHESS. These rule amendments are being progressed through three tranches. 

The consultation rounds on the first and second tranches of draft rule amendments to support the new system have now been completed. A further final round of consultation incorporating both the third tranche of draft rule amendments to support the new system and a consolidated rules package across the three tranches will commence in August 2021.

The rule development timeline captures the key dates for the regulatory and public consultation processes across the three tranches of rule amendments for Day 1 of the new system. It also covers rule amendments addressing new business requirements generated through industry consultation for CHESS Replacement but which are not dependant on the new system and which have now been delivered through ASX business as usual (BAU) processes or the Corporate Actions STP Phase 2 Project. 

The timeline shows both completed and upcoming processes.

Public Consultation on Tranche 1

The first tranche of operating rule amendments was released for public consultation on 15 November 2019, with the period for feedback closing on 17 January 2020. The content related to accounts, participants, securities and pre-settlement aspects for Day 1 CHESS replacement system functionality.

ASX received a total of 12 submissions from a range of stakeholders including participants, registries, industry bodies and vendors.

On 22 May 2020, ASX released its response to consultation feedback received on the tranche 1 draft rule amendments. The response to consultation feedback contains:

• a summary of feedback received in stakeholder submissions;
• ASX's response to such feedback; and
• the draft rules changes made to the ASX Settlement Operating Rules and Procedures and ASX Clear Operating Rules and Procedures, which take into account feedback received.

Public Consultation on Tranche 2

The second tranche of operating rule amendments was released for public consultation on 21 February 2020, with the period for feedback closing on 29 May 2020 (extended from 3 April). The content related to corporate actions, mFund and RTGS payment aspects for Day 1 CHESS replacement system functionality. RTGS supports payments for corporate actions involving entitlement acceptances as well as payments for bilateral demand settlement instructions (addressed in tranche 1 rule amendments).

ASX received a total of 11 submissions from a range of stakeholders including participants, registries, payment providers, an industry body and an approved listing market operator.

On 24 September 2020 ASX released its response to consultation feedback received on the tranche 2 draft rule amendments. The response to consultation feedback contains:

• a summary of the feedback received in stakeholder submissions;
• ASX's response to such feedback; and 
• the draft rule changes made to the ASX Settlement Operating Rules and Procedures, which take into account feedback received.

Public Consultation on Tranche 3 and consolidated rules package

On 28 October 2020, as part of ASX’s response to consultation feedback on the CHESS Replacement Revised Implementation Timetable, ASX announced an amended timeline for a further and final round of consultation on the rule amendments for the new system, accommodating changes connected with the redesign of the NBO process. Amendments to the timeline were also announced in the Implementation and Transition webinar on 3 June 2021 to accommodate changes to netting and settlement workflows consulted on in 2021.

Consultation on the third tranche of operating rule amendments as well as a consolidated rules package across all the rule amendments for the new system will commence in late August 2021, with a 15 week consultation period concluding in early December 2021. ASX will provide its response to consultation in early June 2022, ahead of formal lodgement of the combined rules package with ASIC in early September 2022.

ASX’s response to consultation feedback on the CHESS Replacement Revised Implementation Timetable also announced that:

• Electronic DRP and BSP elections, DRP and BSP enquiry and non-batch DvP bilateral settlement will be included as part of Day 1 CHESS replacement system functionality. Accordingly, rules supporting such functionality (included in the tranche 1 and tranche 2 draft rule amendments) are to be retained in the rules package to be consulted on in August 2021.
• Electronic acceptance and payment for entitlement offers will not form part of Day 1 CHESS replacement system functionality, and will be included in a future release. Accordingly, rules supporting that functionality (included in the tranche 2 draft rule amendments) will be removed from the rules package, and revised timing for these rules will be considered following day 1.

In April 2018, ASX released a consultation paper, CHESS Replacement: New scope and implementation plan to:

• Understand whether any important new business requirements have not been captured
• Invite feedback on the proposed testing and release management strategy
• Invite feedback on the proposed migration and implementation approach
• Understand if any particular information was required by stakeholders to assist in transition planning

The consultation period closed on 22 June 2018 and ASX released its response on 4 September 2018 - a summary of the responses received and detailed changes ASX has made to the scope and implementation plan as a result of industry feedback.

A total of 41 written submissions were received including 21 submissions provided on a non-confidential basis.

Note: please refer to ASX’s CHESS replacement dedicated documentation portal for updated information including on the technical solution design, day 1 scope and implementation timetable.

In September 2016, ASX released a consultation paper, Replacement of CHESS for Equity Post-Trade Services: Business requirements to:

• Provide the market with an update on ASX's evaluation of DLT;
• Set out ASX's preliminary thinking on the business requirements for a system to replace CHESS; and
• To seek initial views from users on their business requirements.

The deadline for submission of responses was 28 October 2016 and ASX released its response on March 2017. ASX asked for additional information from stakeholders via the Supplementary Business Requirements Questionnaire on 22 December 2016.

ASX received 36 written submissions to the original consultation paper, including 23 that were provided on a confidential basis. This provided valuable input to ASX to run a series of industry working groups on new business requirements from May to November 2017.