After abandoning a highly criticized blockchain-based attempt, Australian stock exchange operator ASX (ASX.AX) said that it has contracted Tata Consultancy Services (TCS) (TCS.NS) to revamp its clearing and settlement software. This decision will require less customization.
The move represents a significant shift from its much-publicized 2017 announcement that it would be at the forefront of implementing blockchain-like technology in crucial financial architecture. That announcement was eventually scrapped last year after experiencing many delays.
Additionally, it reflects a more cautious approach: instead of the “big bang” shift that its users deemed dangerous, ASX will transition to the new platform gradually. That will take time, though, since the refurbishment is scheduled to be completed in 2029, or around 13 years after it started.
Listed in India According to the Australian exchange on Monday, TCS’s software is utilized by exchanges worldwide, notably in Finland and Canada, for tasks expected of ASX’s Clearing House Electronic Subregister System, or CHESS.
On a conference call with analysts and the media, ASX Chief Information Officer Tim Whiteley stated, “They have a mature product and technology that they use to support quite a lot of customers.”
“The amount of customization is minimized,” he stated. The contract with ASX was described as “an affirmation of our track record in this mission-critical business” by TCS’s president of banking products, Vivekanand Ramgopal.
A previous blockchain-based initiative by ASX failed after an external evaluation revealed that a large portion of the code needed redone. On Monday, Digital Asset, the startup from New York that it had employed at the time, declined to comment.
A$176.3 million was written down due to the incident, which also caused market players to lose faith in ASX, the 17th-largest exchange in the world, with companies valued at a combined A$1.6 trillion ($1 trillion).
Additionally, it prompted the Australian Securities and Investments Commission (ASIC) to launch a probe into the project disclosures made by the exchange.
ASIC Chair Joe Longo stated, “This is an important decision by ASX, but there is still a long way to go to deliver a CHESS replacement.” “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 stated.
The status of the ASX inquiry was not mentioned in the ASIC statement, and an ASIC spokeswoman was not immediately available for comment.
In afternoon trading, ASX equities saw a 1.7% increase. Notwithstanding their worries, analysts praised the project reset.
“While this decision marks a positive strategic step forward for ASX, the lengthy implementation timeframe and lingering uncertainty over medium-term operating costs and capex implications continue to cloud the cost outlook,” Jarden analysts wrote in a note to clients.
According to ASX, the clearance software phase of the new project will likely cost between A$105 million and A$125 million, with a delivery window of about 2026. In 2024, decisions will be made about the settlement’s cost, timeline, and other software.