ASX Partners with TCS to Overhaul Clearing Software, Leaving Failed Blockchain Behind
The Australian stock exchange operator, ASX, has announced its decision to collaborate with Tata Consultancy Services (TCS) to revamp its clearing and settlement software. This move marks a significant departure from its previous attempt to adopt blockchain technology, which was heavily criticized and ultimately abandoned.
In 2017, ASX revealed its ambitious plan to leverage blockchain-like technology for critical financial infrastructure. However, the initiative faced numerous delays and setbacks before it was eventually shelved last year. An external review found that a substantial amount of the code needed to be rewritten, resulting in financial losses and a dent in market trust.
ASX’s new approach involves implementing TCS’s software, which is already utilized by exchanges worldwide, including Finland and Canada. This software will support ASX’s Clearing House Electronic Subregister System, commonly known as CHESS. ASX Chief Information Officer, Tim Whiteley, emphasized that TCS offers a mature product with minimal customization required.
To mitigate risks and ensure a smooth transition, ASX plans to adopt the new software in stages, rather than through a big bang changeover. Consequently, the overhaul is expected to take a considerable amount of time and is estimated to be completed by 2029, thirteen years after the project’s inception.
The failure of ASX’s blockchain-based project prompted the Australian Securities and Investments Commission (ASIC) to launch an investigation into the exchange’s project disclosures. ASIC Chair, Joe Longo, sees ASX’s decision to partner with TCS as a crucial step forward but emphasizes that there is still much work to be done.
Despite reservations, analysts have welcomed the project reset. However, concerns remain regarding the lengthy implementation timeframe and uncertainties surrounding operating costs and capital expenditures. Jarden analysts suggest that while the decision is positive strategically, these factors cloud the cost outlook and warrant further attention.
ASX’s shares increased by 1.7% following the announcement of its collaboration with TCS. Moving forward, ASX must focus on engaging with the market to design the CHESS replacement program effectively, aiming for realistic and achievable timelines according to Mr. Longo.
In summary, ASX has partnered with TCS to overhaul its clearing and settlement software, abandoning its failed blockchain-based initiative. By opting for TCS’s mature and widely-used software, ASX aims to minimize customizations and enhance its financial architecture. While analysts appreciate the strategic step, concerns persist regarding the implementation timeframe and associated costs. ASX’s collaboration with TCS marks a new chapter in its quest for improved clearing and settlement operations.
