The choice is a major shift from its decision in 2017 to be at the forefront of embracing blockchain-like technology for use in crucial financial architecture, an effort that caused recurrent delays before it was dropped last year
Australian stock exchange operator ASX said it had hired Tata Consultancy Services (TCS) to revamp its clearing and settlement software, opting for a route that will take less customisation after dropping a much-criticised blockchain-based effort.
The choice is a major deviation from its decision in 2017, announced with much fanfare, to be at the forefront of embracing blockchain-like technology for use in crucial financial architecture, an effort that caused recurrent delays before it was dropped last year.
It also represents a more careful approach: ASX will switch to the new software in steps, instead of the “big bang” transition that its users considered risky. That will, nevertheless, take time, with the revamp now expected to complete in 2029, around 13 years after it started.
India-listed TCS’s software is used by exchanges around the world including in Finland and Canada for functions it would be expected to perform for ASX’s Clearing House Electronic Subregister System, or CHESS, ASX stated Monday.
They have a mature product and technology that they use to support quite a lot of customers, ASX CIO Tim Whiteley told analysts and media.
The amount of customisation is minimised, Whiteley said.
The failure of its blockchain-based project came after an external review found much of the code had to be rewritten. Digital Asset, the New York startup it hired at the time, declined to comment on Monday.
The failure also caused a $115.59 million writedown and had shaken market participants’ trust in ASX, the world’s 17th largest exchange that hosts companies worth a combined $1 trillion.
It also prompted the Australian Securities and Investments Commission (ASIC) to open a probe into the exchange’s disclosures about the project.
This is a vital decision by ASX but there is still a long way to go to deliver a CHESS replacement, stated ASIC Chair Joe Longo.
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, he said.
ASX shares rose 1.7 per cent in afternoon trade. Analysts welcomed the project reset despite reservations.
While this decision marks a positive strategic step forward for Australian stock exchange, the lengthy implementation timeframe and prolonged uncertainty over medium-term operating cost and capex implications continue to cloud the cost outlook, Jarden analysts said in a client note.