The ASX’s CHESS debacle could increase costs medium-term, and attract higher regulatory scrutiny and competition.
Morgan Stanley slashed its price target on shares of the ASX by 10 per cent, citing higher costs associated with the reset of its stricken CHESS upgrade and weaker float activity.clearing and settlement replacement project.While this is expected to reduce the bourse’s capital expenditure in the 2023 financial year by $15 million, Morgan Stanley pointed out that the CHESS system will need to be replaced eventually, which could increase costs in the medium term.
The setback will also attract increased regulatory scrutiny on the ASX to upgrade its technology systems and improve stability, according to analyst Andrei Stadnik.“We think this, coupled with a tight labour market, especially in tech, will lead to further cost pressures and see risk of operational expenditure and capital expenditure rising higher,” he said.
“ASX has faced no new competition in the past several years,” Mr Stadnik said. “But CBOE recently acquired Chi-X Australia and we think this will lead to more competition verse the ASX in 2023, particularly on trade innovation and global data.”
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