The Clearing House Electronic Subregister System (CHESS) is a pivotal technology for the Australian Securities Exchange (ASX), facilitating the recording of shareholdings and the settlement of share transactions. Developed over 25 years ago, CHESS significantly improved trade processing efficiency. Despite its robust performance, with an average monthly service availability of 99.99% over the past five years, the ASX has embarked on a mission to replace CHESS with more advanced technology. This upgrade aims to offer a broader range of benefits to a wider market segment.
Understanding the project and its industry impact
In November 2022, the initial attempt to replace CHESS was scrapped due to escalating costs and delays, resulting in a write-off exceeding $250 million. Additionally, the ASX may need to compensate trading firms, which collectively invested around $100 million in system upgrades in preparation for the new network.
Despite these setbacks, the project is far from over. The ASX has recently engaged Tata Consulting Services (TCS) to spearhead the new CHESS replacement project. The rollout will occur in two phases: clearing in 2026, followed by settlement and sub-register functions in 2028 or 2029.
The replacement of CHESS provides issuers and end investors with greater control over, and enhanced confidence in, market activities through timely, secure and simplified access to the register of holders (for issuers), financial assets (end investors) and associated information. It enables the industry to meet and respond to changing local and global markets, and promote further innovation through new levels of functionality, open standards and flexible technology. - ASX, About CHESS Replacement
Implications for trading firms and internal staff
The ASX's commitment to round-table discussions aims to garner feedback on market readiness and migration strategies for the new system. Incentive payments are expected to motivate industry stakeholders to collaborate with the ASX in successfully implementing the CHESS replacement. However, the initial project's failure has shaken confidence in the ASX's capabilities, leaving firms wary of investing further resources in a potentially futile endeavour.
Senior leaders
Senior leaders from trading firms express considerable frustration. Many had already restructured operating models and hired additional contract staff for the project, incurring substantial costs. When the original project was terminated, funding was cut, leading to the dismissal of contractors. With the project's revival, a new round of hiring will be necessary, further straining resources.
Internal staff
For internal staff, the project presents opportunities for skill development and career advancement. Employees may be seconded to the project, gaining experience in roles they otherwise wouldn't have access to. This shift is likely to create vacancies that could be filled by external candidates, opening up opportunities at junior levels during a time of scarce job availability.
Moreover, the demand for Project Managers, Business Analysts, Test Engineers, and senior technology professionals is expected to rise significantly.
Preparing for the future: A recruiter's perspective
With the project's completion not anticipated for at least five years, impacted companies face a busy period ahead. Recruiters play a crucial role in this landscape. Maintaining close relationships with hiring managers is essential to stay updated on timelines and business needs, enabling proactive planning and candidate pool development.
Early organisation in recruitment efforts is critical. Given that multiple firms will be vying for similar talent, securing top-tier candidates necessitates prompt and strategic action. By anticipating hiring needs and preparing ahead of time, recruiters can ensure they are ready to meet demand as roles become available.
In summary
The CHESS replacement project is a significant undertaking with profound implications for the ASX and the broader trading community. While challenges abound, the project also brings opportunities for industry professionals and recruiters alike, paving the way for a dynamic and evolving market environment.
Author Charlie Fitzroy has been recruiting in the banking and financial services team across the Sydney market since 2011. Charlie has an in-depth knowledge of wealth management, fund administration and financial market operations.
Edited by Melanie Brown, Marketing Executive, Ambition Group Australia.
