By David Ferrall, Managing Director and CEO, FinClear Group
This is bigger than CHESS
CHESS has served Australia well for thirty years. Its replacement will be a much-needed technology upgrade. But its ways of operating, and the processes and rules relating to collateral, margining and capital, will remain unchanged.
In effect, structural inefficiencies will be repackaged, not resolved.
Meanwhile the world has moved on. BlackRock CEO Larry Fink has declared that we are just at the beginning of the tokenisation of all assets, and since that statement almost every major global exchange has declared it is exploring, partnering or developing real-time 24/7 trading and settlement capabilities. Against that backdrop, the T+2 infrastructure that CHESS supports could be obsolete even before its replacement is delivered.
When critical financial infrastructure is allowed to fall behind global standards, the consequences extend well beyond market efficiency. Capital follows the path of least resistance, and if Australia’s settlement and clearing infrastructure cannot interoperate with where global markets are heading, that capital will find jurisdictions where it can.
We have seen this happen before, in data, media, and now with artificial intelligence, where domestic opportunities became vehicles for foreign value extraction.
AirTrunk’s decision to pursue a Singapore listing highlights what is at stake. When Australian companies building globally relevant infrastructure choose offshore capital markets, it is not simply a commercial decision, it is a transfer of economic value. Left unchecked, these decisions erode Australia’s position in the global capital system.
Market infrastructure is the foundation on which every Australian investment, superannuation balance and capital raising sits. Allowing it to become a competitive liability, and adding it to the list of those above, is not a market problem, it is a national one. It’s time we treated it as a sovereign risk.
What we stand to lose
ASX and its commitment to further develop CHESS is its own business, and regulatory oversight leaves them with little choice. But the diminished competitive positioning, entrenched inefficiencies and the cost to the industry is everyone’s problem.
A recent independent report by the DFCRC, Unlocking Australia’s $24 Billion Digital Finance Opportunity, found that modernising Australia’s financial infrastructure through tokenisation and distributed ledger technology could unlock A$24 billion in annual economic gains, across markets, payments and assets.
Australia is on track to capture just $1 billion of that by 2030. The rest will go elsewhere, and it won’t come back.
Market infrastructure is systemically important. It underpins every investment decision made by every Australian with a superannuation account, a share portfolio or a savings plan.
Critically, competition at the trading layer alone, the Cboe model, will not address the underlying structural problem. Without reform at the clearing and settlement layer, increased competition risks reinforcing concentration rather than alleviating it.
CHESS is not the (only) answer
Focusing on CHESS may be the easiest path, but it is not the only answer. What is needed is regulatory and industry support for new models, including modernised processes, capital frameworks and infrastructure capable of supporting real-time markets.
Australia has a strong history of market innovation, from the introduction of electronic trading to the creation of CHESS itself. But CHESS has not materially changed in three decades.
A dual-track approach is needed, one that completes the CHESS upgrade while simultaneously enabling a more progressive solution to be built alongside it, with the potential to supersede it over time. That means T+0 atomic settlement, native tokenisation, and real-time integration with Australia’s New Payments Platform. Infrastructure designed for an AI-enabled world, not rebuilt for the analogue world of thirty years ago.
The infrastructure exists today
This is not a theoretical proposition. The licensing frameworks, the technology and the operational capability to deliver real-time atomic settlement and native tokenisation of financial and real-world assets already exist within the current Australian regulatory framework. The foundation has been laid. The challenge is how to scale into public markets and the will to deploy.
The consequences of inaction are clear. What remains unanswered is the only question that matters. What comes next?
Australia has missed too many of these inflection points before. We cannot afford another generation of infrastructure built for yesterday’s markets.
The capability and licensing exist and the need is unambiguous. What is missing is a national commitment to act.
