On December 20, 2024, the Australian Securities Exchange was unable to settle trades that Friday as part of the bourse’s two-day clearing system.
In short, trades couldn’t be settled – something that had never happened before.
Whereas many times hiccups to online trading platforms centre on speculative losses and damages that are therefore hard to award, this time, the ASX has paid out brokers – and the CEO has even made an apology.
Payments of $1 million will be made to brokers – described as ‘goodwill’ – who had to find the money to cover trades on Friday, December 20.
Understandably, those with the most to lose don’t view this story as one of the software technicalities: They view it as a straight-up failure by ASX Ltd (ASX:ASX) in the proper operation of its services.
All of this comes not long after the ASX was sued by ASIC over the releasing of fake statements to the Australian market in the quite recent past regarding the progress of its in-house trading software update.
The software currently in use, CHESS, is thirty years old and has long been bemoaned by the ASX, serious day traders, and the peoples who conduct algorithm trading.
But what, exactly, the ASX will replace CHESS with has always felt, to me at least, vague.
The Aussie bourse at one point talked about replacing CHESS with blockchain – something which feels strangely youthful and, perhaps because of that, painfully optimistic.
For now, the replacement software is meant to be ready for 2026 – later than what was advertised in earlier market-facing announcements from the bourse operator.
So what went wrong with CHESS? It’s quite boring to talk about.
Basically, the software – or more pertinently, its aging code (you should see HotCopper’s) – encountered a set of circumstances that triggered a bug first introduced back in 2014.
That bug had a lot to do with internal memory allocation and deeply computer-nerd things that aren’t particularly important in the grand scheme.
What is most pressing is for ten years, quietly sitting there under the surface, there was always the possibility if the stars aligned, it would mean trades couldn’t settle; stockbrokers would have to scramble to cover trades.
Last December, those stars finally aligned. And it appears the bourse took a while to figure out what exactly went wrong – which is exactly the problem with legacy software.
ASX last traded at $64.26/sh; 1Y returns are down -3%.
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