The Australian stock exchange operator ASX (ASX.AX) has revealed its collaboration with Tata Consultancy Services (TCS) (TCS.NS) to revamp its clearing and settlement software. This decision marks a significant shift from ASX’s high-profile announcement in 2017, where it aimed to be a pioneer in adopting blockchain-like technology for critical financial infrastructure. However, the blockchain initiative faced severe criticism and repeated delays before being abandoned last year.
ASX Adopts Cautious Approach with TCS Software Transition, Anticipating Gradual Implementation and Completion by 2029
The new approach signifies a more cautious strategy, as ASX plans to transition to the TCS software gradually, opting for a phased implementation rather than a high-risk “big bang” changeover. Despite this more measured approach, the overhaul is expected to be a lengthy process, reaching completion in 2029, approximately 13 years after its initiation.
TCS, a company listed in India, boasts software that is globally utilized by exchanges, including those in Finland and Canada, for functions similar to those required for ASX’s Clearing House Electronic Subregister System (CHESS).
ASX Chief Information Officer Tim Whiteley highlighted TCS’s mature product and technology, emphasizing minimal customization requirements. The President of Banking Products at TCS, Vivekanand Ramgopal, expressed the company’s satisfaction, considering the ASX contract an affirmation of their track record in this critical business domain.
ASX’s Strategic Shift: Abandoning Blockchain Project After Significant Setbacks, Navigating Trust Issues, and Anticipating a Cautious Overhaul
The decision to abandon the earlier blockchain-based project was prompted by an external review revealing significant code rewriting needs. The failure incurred a substantial A$176.3 million writedown, impacting market trust in ASX, the 17th largest exchange globally, hosting companies valued at a combined A$1.6 trillion ($1 trillion).
The fallout from the failed blockchain project led the Australian Securities and Investments Commission (ASIC) to open an investigation into ASX’s disclosures regarding the initiative. ASIC Chair Joe Longo emphasized the importance of ASX engaging transparently with the market during the detailed design phase of the CHESS Replacement program.
While ASX shares saw a 1.7% increase, analysts welcomed the project reset, acknowledging it as a positive strategic move. However, reservations remain due to the extended implementation timeframe and lingering uncertainty regarding operating costs and capex implications.
ASX anticipates the first stage of the new project, clearing software, to cost between A$105 million and A$125 million, with delivery expected around 2026. Decisions on the cost and timing of settlement and other software components will be made in 2024.
