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Cboe called on the committee, which has conducted two hearings to determine the causes of ASXs IT failures, to recommend that regulators actually deploy new powers being given to them by the Parliament to break the ASXs monopoly.

The potential competitor wants more rigorous oversight to address the extreme vertical integration of the ASX group and the resulting conflicts of interest, which is the root cause of the failures around the provision of clearing and settlement services in Australia.

Computershare is calling for a more robust governance framework including ensuring future users of the new system get a voice on the revised plans, citing fundamental problems with ASXs current approach to meetings and industry consultation.

For example, Computershare said for two of the three technical committee meetings held by ASX this year to consider the design of the new CHESS, meeting documentation had been shared with participants less than one hour before it commenced. It also criticised the ASX rebate partnership program that was announced at a results briefing without any detail on how it would operate; the ASX then provided just one week for market consultation.

Despite recent scrutiny of ASXs project management and governance processes, we continue to encounter poor engagement by ASX with the stakeholders, Computershare told the committee, which is chaired by senator Deborah ONeill. She called for PwC scalps last week after its tax leak scandal.

Cboe said ASXs apparent examination of new software vendors was not being done transparently. ASX had already conducted a request for information process and was working on a more specific request for proposal process with selected software vendors, it said. But Cboe was not given any meaningful opportunity to contribute to these processes and ASX has refused to provide the RFI or RFP document or summaries to its user stakeholders.

This is clear evidence of ASX failing to change its approach after the initial projects failure, the company said. Rather, ASX is conducting the new process according to its own priorities and in a way that is not appropriately transparent with its users, and does not allow users to contribute to the future CHESS design, it added.

For example, the proposed second CHESS model does not have any regard for using industry-standard APIs and ensuring open access to interfaces, nor will it ensure there can be interoperability with any future clearing and settlement facility that emerges, Cboe suggested.

It has called for the PJC to support the passage of Treasurer Jim Chalmers Competition in Clearing and Settlement Bill, and to recommend that regulators use new powers to promote and enable competition in the provision of clearing and settlement services.

With ASX preparing for an investor day early next month, where it wants to present progress to its shareholders on the development of the new CHESS as it maintains the old one, it is also understood that the PJC is preparing to hold additional hearings next month.

The latest submissions suggest the additional hearings may now turn the focus to the governance of the revised project, adding to pressure on ASX directors and chairman Damian Roche, who faces a second strike at the AGM later in the year, which could trigger a board spill.

Computershare called for ASX to establish an effective governance framework with an industry representative and to be required to communicate its intended guiding principles and core attributes of the new platform. It wants ASX to articulate the impact of changes, and engage in effective consultation and negotiation. Only then should work begin on selecting the technology for the new platform, it says.

Computershare said the move to T+1 settlement in US equities next year would put pressure on all international exchanges, including ASX, to follow suit, lifting the urgency of the new project.

Finclear, which, like Cboe, could also emerge to provide alternative clearing and settlement technology, asked the committee to call for the Council of Financial Regulators to step in and design the new approach.

ASX cannot be relied upon to fix what is critical infrastructure. It would be a mistake to leave it to ASX to design a solution, Finclear said. ASX remains in a highly conflicted position and its competence to deliver such a complex project is highly questionable. At best, it will lead to a piecemeal of disparate technologies, entrenching monopoly, or at worst, to another aborted project.

Lamenting the lack of a clear pathway for competition in clearing and settlement services to emerge, Cboe pointed to ASXs discriminatory margining requirements, whereby ASX Clear can advantage investment products quoted on the ASX market over products quoted on the Cboe market.

CHESS replacement is the latest and largest in a series of escalating failures that have highlighted the high cost-zero competition paradigm that exists in Australia, Cboe told the committee.

It is critical that government and regulators, in this pivotal moment when the future of CHESS is being determined, are relentless in identifying and addressing the root cause of this failure and ensuring that Australia has a fit-for-purpose clearing and settlement model for the future.

No submission from ASX had been published by the committee as of Friday afternoon.

Earlier on Friday, ASX said its chief customer and operating officer, Val Mathews, had announced her intention to resign; she will depart in the coming months after four years on the executive team.

More:
ASX: Second CHESS replacement a case of history repeating: market - The Australian Financial Review