Section 02 - CHESS overview

Section 02 - CHESS overview

2.1 CHESS Concepts

CHESS is an acronym for Clearing House Electronic Subregister System.

CHESS provides a centralised electronic subregister for holdings of approved financial products. Holdings on this subregister are recognised in law as if they were maintained directly by the issuer. The purpose of the electronic register is to facilitate settlement of market transactions executed on Approved Market Operators' trading platforms between participants on a delivery versus payment (DvP) basis (settlement can occur in either Batch settlement or via RTGS). CHESS also allows for the electronic transfer of ownership of financial products.

2.1.1 Some CHESS History

For a long period it was recognised that inefficiencies in Australia’s paper-based settlement system, such as those caused by demand settlement, must be addressed. The need for establishing a more efficient system was highlighted during the 1986/87 “bull” market. Settlement backlogs, caused by failure to deliver promptly, stemmed the free flow of funds between industry participants and between them and their clients, as well as raising concerns about counterparty risk.

The impetus for reforms to overcome these problems and to restore faith in the Australian equity market was boosted in 1989 by the “Group of Thirty” (G30). This international organisation identified the risks in securities settlements and subsequently promulgated a set of standards and goals for the industry worldwide, to alleviate those risks.

In order to achieve compliance with the G30 recommendations, the then National Companies and Securities Commission (NCSC) established a high level steering committee to co-ordinate reform of Australia’s equities settlement system. In May 1990, the steering committee agreed to adopt the CHESS proposal for upgrading the system, as part of a three-stage strategy for upgrading Australia’s settlement facilities.

The first stage (1989) was the introduction of the Flexible Accelerated Security Transfer System (FAST), which enabled eligible securities to be held in uncertificated form, at the discretion of the holder.

The second stage (1992) was the introduction of a short period (T+5) fixed settlement discipline for market transactions.

The third and final stage was the development and implementation of CHESS.

In 1994, CHESS was implemented (refer to section 2.1.3). By the end of 1995, the subregister had been extended to include all securities of Australian domestic issuers.

In August 1996, delivery versus payment (DvP) settlement was introduced for all approved securities.

In February 1999, the trade date plus three business days (T+3) fixed settlement regime was introduced. In addition, by this time all Australian domiciled listed entities were operating fully uncertified registers. This completed the implementation of the G30 recommendations.

In 2003, the federal parliament passed the Financial Services Reform Act (FSRA), which addresses various parts of the regulatory regime for financial services, including a new licensing regime for the operators of financial markets and clearing and settlement facilities. The new regime was implemented in March 2004.

Before the FSRA, the Corporations Act made provision for a single Securities Clearing House designated by the Minister, but did not require licensing of all securities clearing and settlement facilities. FSRA replaced this with a unified and flexible clearing and settlement facility-licensing regime for all providers of clearing and settlement infrastructure, thereby imposing regulatory consistency, and providing for more flexibility and competition.

While CHESS continued to be operationally stable and effective, by 2015 the age of the system had ASX considering its replacement options. In January 2016, ASX selected Digital Asset as a technology partner to develop, test and demonstrate to ASX a working prototype of a post-trade platform for the cash equity market using DLT. This initial phase of work was completed in mid-2016. Also in 2016, ASX released a consultation paper primarily seeking stakeholder feedback on what the market would want from CHESS replacement, culminating is a series of industry working groups in 2017 to elicit new business requirements. In December 2017, ASX completed its own analysis and assessment of the technology which included:

  • Comprehensive functional testing of the critical clearing and settlement functions currently performed by CHESS

  • Comprehensive non-functional testing (scalability, security and performance requirements) for a replacement system when deployed in a permissioned private network

  • Third party security reviews of the Digital Asset DLT based system

In 2016, ASX Settlement transitioned from a T+3 settlement cycle to a T+2 settlement cycle for cash market transactions.

In April 2018, ASX released a consultation paper to understand if there were any important new business requirements that were not captured, inviting feedback on the proposed testing, release management strategy, proposed migration and implementation approach as well as to understand if there was any particular information stakeholders needed to assist in transition planning.

On 15 November 2019, ASX released its first consultation paper on the operating rule amendments required to facilitate the implementation of the new system that will replace CHESS. The first tranche related to accounts, participants, securities and pre-settlement aspects for Day 1 CHESS replacement system functionality.

On 21 February 2020, ASX released the second consultation paper on the operating rule amendments required to facilitate the implementation of the new system that will replace CHESS. These related to corporate actions, mFund and RTGS payment aspects for Day 1 CHESS replacement system functionality. 

On 25 March 2020, due to the uncertainty created by the COVID-19 pandemic and in response to user feedback on timing, requested functionality changes and the need for ASX to complete aspects of its own readiness, ASX announced it would further consult on the CHESS replacement implementation timetable in June 2020. ASX will seek user input on a new schedule that will move the go-live date from April 2021 to a later date. The replan will provide additional time for users to complete their operational readiness activities and to consider the rule changes that accompany the new system. 

Approved Market Operators are holders of a market licence under the Corporations Act that have been approved by ASXS and ASXCL as an “approved market operator”. A list of Approved Market Operators is maintained in the ASX Settlement Operating Rules Procedures and ASX Clear Operating Rules.

The functionally based structure of the ASX groups that provide post-trade services to Approved Market Operators is as follows:

  • ASX Clear Pty Limited (ASXCL) is a central counter party (CCP) and clearing facility for Approved Market Operators, providing clearing and counterparty risk management services; and

  • ASX Settlement Pty Limited (ASXS) is a settlement processing facility for Approved Market Operators, providing settlement and asset-registration services, which it facilitates through the use of CHESS.

Each entity is separately licensed under the Corporations Act to carry on its functions. Each has its own rule book, which applies to all products and assets in relation to which services are offered.  The rules books are:

  • ASX Clear Operating Rules, covering the responsibility for counterparty risk for market transactions and access to clearing facilities and conduct of clearing participants; and

  • ASX Settlement Operating Rules, covering access to settlement infrastructure for the purpose of payment, delivery and asset registration and conduct of settlement participants.

2.1.3 CHESS Subregister

Central to the operation of CHESS is the concept of uncertificated (dematerialised) holdings and the provision of a CHESS subregister on which uncertificated holdings are maintained by controlling participants. The CHESS subregister is an integral part of an issuer’s register for an approved financial product.

Certain information within the CHESS subregister is recognised as forming part of the legal register of holders for a financial product, upon which each individual holder’s holding and registration details are maintained. This is in contrast to the depository nominee approach to electronic transfer, common in foreign settlement systems, in which holding records are maintained as sub-accounts within the registered holding of a “super” nominee. 

In addition to the CHESS subregister, which is maintained by ASXS, the issuer’s registry directly maintains the subregister for issuer sponsored holdings. 

Balances of issuer sponsored holdings are maintained directly by issuers’ registries.

Together, the CHESS subregister and the issuer controlled subregister form the principal register for a financial product.

Through the electronic subregister, CHESS implements a name-on-register approach to achieving book entry transfers.

Transfers may be initiated by participants for their own holdings and holdings under their control, as well as by ASXS in the process of delivery versus payment (DvP) settlement. Transfer requests between participants may be unilateral or matched bilateral transactions. Movements are effected on demand or when scheduled through DvP settlement (including Batch settlement and RTGS for BDSI). Registries can effect holdings on the CHESS subregister through holding adjustments and as a result of corporate actions.

If both parties to a market transfer are registered on the CHESS subregister, the transfer is effected by a “book entry” within the CHESS subregister. If one of the parties to a market transfer is registered on the issuer sponsored subregister, the holdings must be first converted to the CHESS subregister before transfer. Such a movement involves a request by the participant and a confirmation from an issuer sponsored subregister.

2.1.4 Approved Financial Products

Financial products cleared and settled through CHESS are deemed to be “Approved Financial Products”.

Market trades in cash market products executed on the trading platforms of Approved Market Operators and reported to CHESS in approved financial products are delivered and settled between participants electronically through CHESS. Transactions in financial products that are not approved require settlement to occur outside of CHESS.

For securities in companies domiciled in countries that do not recognise uncertificated holdings or electronic transfer of legal title, the ASX developed CHESS Depository Interests (CDIs). CDIs allow such securities to be transferred and held in CHESS.

For further information, refer to Section 16 - CHESS depositary interests.

2.1.5 Regulation S: Offerings and Sales of Securities on ASX

For full details of the impact of Regulation S offerings and sales of securities on ASX, refer to ASX Listing Rules Guidance Note 7 (US Entities – Regulation S Offerings on ASX) and ASX Settlement Rules Guidance Note 13 (Financial Products Subject to Foreign Ownership Restrictions) for further details.

2.1.6 Holders

A holding in a financial product is registered on either the issuer sponsored subregister or the CHESS subregister. 

Any person or organisation legally entitled to own financial products can do so by being registered on the issuer sponsored subregister of the relevant financial products.

However, only participants and the holders they sponsor can hold financial products on the CHESS subregister. An investor and a participant enter into a sponsorship agreement in order for the investor to hold financial products on the CHESS subregister. An investor can “convert” their holdings between the two subregisters (refer to section 6).

2.1.7 Sponsorship of Holders

ASXS participants may establish and control any number of sponsored holders within CHESS.

2.1.8 Sponsorship Agreements

The ASX Settlement Operating Rules provide thorough information concerning the mandatory content of sponsorship agreements. 

ASXS periodically reviews participants’ sponsorship agreements to ensure that they comply with the provisions set out in the ASX Settlement Operating Rules.

2.1.9 CHESS Communications with Sponsored Holders

ASX Settlement is responsible for communicating changes to CHESS holding balances (i.e. financial products held on the CHESS subregister) to the registered owner.

Where the holding is held by the participant directly (as distinct from a sponsored holding) or as an entrepot account, this communication is by way of CHESS messages.

Additional details on CHESS communications with sponsored holders including Demand Holding Statements and the Suppression of Holding Statements will be made available in a subsequent release.

2.1.10 CHESS Holding Subpositions

A holding subposition is created to move the authority to perform holding movements from the registered owner to a third party with a vested interest in that holding. The subposition remains registered in the holder’s name. Subpositions are often used for takeover acceptances, buyback acceptances and collateral.

CHESS checks that the total of a holding’s subpositions do not exceed the holding balance.

CHESS preserves the subpositions while the register is either open, suspended or closed. Participants can only increase a subposition while the subregister is open.

The subposition is removed either on the initiation of the third party or by the participant requesting the third party’s permission through CHESS.

Transactions initiated by registries can in certain circumstances, override the subposition. CHESS proportionally adjusts subpositions during a reconstruction.

2.1.11 Financial Products Subject to Foreign Ownership Restrictions

Financial Products subject to foreign ownership restrictions (FOR) have predefined aggregate limits on the holdings of “foreign” persons.  The aim of applying FOR to certain financial products is to ensure that foreign persons do not control more than a specified percentage of the issuer’s share capital.

The source and nature of the restrictions are usually detailed in either the issuer’s constitution or relevant legislation governing the issuer’s financial products or both. 

In some cases, these restrictions operate on a permanent basis and specify the actual aggregate percentage of foreign investors allowed (e.g. 49%). In other cases, these restrictions operate on a transient basis - for example the restrictions an issuer may apply prohibiting foreign security holders from taking up an entitlement under a rights issue or pro rata offer of securities in relevant overseas jurisdictions. This includes restrictions on US Ownership applied by issuers seeking to take advantage of relief available for offerings under the safe harbour provisions of Regulation S under the US Securities Act 1933.

Breaches of foreign ownership limits can result in a buyer being divested of some or all of a holding.

Participants should note that there is no standard definition of “foreign person” that applies to all issuers subject to foreign ownership restrictions. Participants must therefore exercise care in determining whether a person is a “foreign person” for the purposes of maintaining a holding in the relevant issuer’s financial products.

A CHESS holder’s residency is specified in their registration details. Refer to section 4 and Account and Holder Creation Overview for further details.

For transfers of foreign products with a FOR, CHESS allows participants to specify a foreign to foreign transfer (refer to section 7.1.5). This ensures a foreign buyer is allocated securities held by a foreign holder and removes the risk that the buyer will be divested of the holding.

2.1.12 Users of CHESS

ASX Clear Operating Rules, and ASX Settlement Operating Rules govern the admission criteria and the conduct of all users of CHESS.

Refer to section 3 for further detail on Participation in CHESS.

CHESS identifies its users with a unique participant identifier (UIC). Users and participants may request that a BIC (which is optional) be used as an identifier.

The following table describes the key roles various users of CHESS perform in the system. Refer to section 3 for further details on Participant roles.



Market Participants

A market participant executes orders to buy and sell financial products on the trading platform of an Approved Market Operator.

Market participants must be able to clear and settle instructions in CHESS either themselves or by having an agreement with a clearing participant and settlement participant that performs clearing and settlement in CHESS on their behalf.

Approved Market Operators

Approved Market Operators execute investor’s orders to buy or sell financial products on their trading platform. 

Approved Market Operators register their trades within CHESS instructing a clearing participant and settlement participants that performs clearing and settlement in CHESS to clear and settle as per their agreement. 

Institutions and Custodians

Institutions and custodians are eligible to participate in CHESS upon substantiating their ability to meet participation criteria. They are also called non-market participants.

Account Participants

Account Participants are a type of participant that can create and maintain accounts on the CHESS sub-register and transfer financial products through CHESS in non-batch settlement, on a FoP basis, but cannot participate in batch settlement.

Clearing Participant

A clearing participant performs the clearing function (i.e. through novation becomes party to contracts that replace the original market contract with the central counterparty).

Clearing participants must also be settlement participants or have an agreement with one.

Clearing participants can act for themselves (direct clearing participants) or on behalf of other participants (general clearing participants).

Settlement Participant

A settlement participant performs the settlement function (i.e. transfer of payments and financial products and registration of title).

Settlement participants can act for themselves or on behalf of other participants.

RTGS Participant

General Settlement Participants or Banks that are batch Payments Providers that have applied to participate in the capacity of RTGS Payments Providers, have satisfied all applicable participation criteria and have been admitted by ASX Settlement as RTGS Payments Providers.


An issuer is an entity that has a financial product listed on an Approved Market Operator. An issuer has a register of holders of its financial products.


A registry maintains an issuer sponsored subregister of holdings in an issuer’s financial products on the issuer’s behalf. Some issuers have a registry in-house and some use a specialist registry service provider.

Registries have access to specialised CHESS functionality, which includes the authorisation of conversions and transfers between the issuer sponsored sub register and the CHESS subregister.

Participant bidder

During a takeover bid or equal access buyback, either the participant bidder or their agent (e.g. a registry) performs certain obligations in CHESS (e.g. acceptances).

Participant bidders are usually specialist settlement participants (refer to section 3.4.2 for further details)

Payment Provider

Each participant establishes at least one payment facility for the settlement of cleared funds with a payment provider (refer to section 3.9).

RTGS Payments Provider

A Payments Provider that provides a payment facility for one or more RTGS Participants for the settlement of cleared funds for the purpose of Real Time Gross Settlement.

Specialist Settlement Participant

A Specialist Settlement Participant is an entity admitted as a Participant in the daily settlement facility for a specific purpose such as managing a takeover offer or buyback.

Product Issuer Settlement Participant

Persons who are admitted for limited purposes including facilitating the settlement in Batch Settlement of transactions relating to requests for issue and redemption of AQUA Products. A Product Issuer Settlement Participant may not establish or maintain Participant Sponsored Holdings.


2.1.13 Fees and Charges

ASXS and ASXCL charges for the services provided by CHESS.

ASXS and ASXCL publish a full schedule of all charges levied for the use of CHESS services on the ASX Online website ( 

Additional details on Fees and Charges will be made available in a subsequent release.

2.2 CHESS Processing Schedule

Participants and registries can send requests and instructions to CHESS at any time. CHESS actions each message at the earliest time possible, given the constraints of the processing schedule. 

Additional details on the CHESS Processing Schedule will be made available in a subsequent release.

RITS is the Reserve Bank’s funds settlement system.

CHESS queues any transactions that it cannot action immediately. In some circumstances a queued transaction may no longer be valid when actioned.

CHESS processing is discussed in the various chapters of this guide, which include:

2.3 CHESS Connectivity

CHESS Connectivity is discussed in detail in Connectivity.

Communication between a participant and the CHESS system is via one of the supported networks. Only ASX Net and SWIFTNet will be supported. The supported networks and their connectivity options are listed in Connectivity.

As CHESS exchanges messages of financial value with participants, communications security is a vital part of its network design. This security is built on two principles:

  • encryption of messages; and

  • message authentication.

Encryption ensures confidentiality of information sent between two parties and prevents a third party from accessing that information. Its use is transparent to the sending and receiving systems.

Message authentication ensures that 

  • a valid sender sent the message (preventing the sending of unauthorised messages) being sent; and 

  • the integrity of the message is preserved during transmission (preventing unauthorised changes to the message).

These techniques help to ensure privacy of communications, a valid message origin, integrity of content and no risk of tampering.

Requirements for encryption and message authentication vary depending on the connectivity options. They may require additional software development by the participant and may require specialised hardware. For further information, refer to ISO Message Signing for AMQP and the SWIFTNet Messaging for SWIFT.