Australian stock exchange operator ASX claimed to hire Tata Consultancy Services (TCS) to overhaul its clearing and settlement software. This decision follows the abandonment of a widely criticised blockchain-based initiative, and the chosen approach involves less customisation.
This decision is a significant shift from its 2017 announcement to be a pioneer in integrating blockchain-like technology into essential financial infrastructure. That endeavour was repeatedly delayed before being ultimately abandoned last year.
It also represents a more cautious approach of ASX: the operator will change to the new software in stages instead of one “big bang” changeover that was viewed as a risky movement. However, that will take longer, with the overhaul expected to be completed in 2029, about 13 years since its beginning.
Commenting on TCS’s software, the Australian exchange said on Monday that the India-listed software was employed by global exchanges, including those in Finland and Canada, to carry out functions comparable to what is anticipated for ASX’s Clearing House Electronic Subregister Systems (CHESS).
“They have a mature product and technology that they use to support quite a lot of customers. The amount of customisation is minimised,” said ASX Chief Information Officer Tim Whiteley on a call with analysts and media.
Vivekanand Ramgopal, TCS’s president of banking products, stated that the ASX contract acted as “an affirmation of our track record in this mission-critical business.”
After an external scrutiny of the failure of ASX’s earlier blockchain-based project, it showed that much of the code must be rewritten. Digital Asset, the New York startup it hired then, refused to comment on Monday.
The ASX’s failure also led to an A$176.3 million writedown and had shaken market participants’ trust in the operator. It also prompted the Australian Securities and Investments Commission (ASIC) to open a probe into the exchange’s disclosures about the project.
“This is an important decision by ASX, but there is still a long way to go to deliver a CHESS replacement,” ASIC Chair Joe Longo said in a statement.
“It will be critical for ASX to now focus on engaging with the market on the detailed design of the CHESS Replacement program with a realistic and achievable timeline for implementation,” Longo added.
ASIC did not mention the status of the investigation and was not available for comment.
ASX shares were up 1.7% in afternoon trading, with analysts welcoming the project reset despite misgivings.
“While this decision marks a positive strategic step forward for ASX, the lengthy implementation timeframe and lingering uncertainty over medium-term operating cost and capex implications continue to cloud the cost outlook,” Jarden analyst said in a client note.
ASX said it expected the first stage of clearing software to cost between A$105 million and A$125 million, with delivery around 2026. The cost and timing of the settlement and other software will be decided in 2024.
