The Australian stock exchange, ASX, has shifted gears in a strategic move by enlisting Tata Consultancy Services (TCS) to revamp its clearing and settlement software. This decision marks a substantial departure from its previous high-profile attempt at implementing blockchain technology, which faced criticism and was ultimately abandoned.
The move away from blockchain technology, initially announced in 2017 amid much anticipation, underscores a more cautious approach by ASX. The shift towards TCS’s software represents a shift towards a less customized solution and a phased implementation strategy, contrasting with the previous “big bang” approach that was perceived as high-risk by users. However, this transition is anticipated to be gradual, with the overhaul now projected to conclude by 2029, 13 years after its inception.
ASX’s Chief Information Officer, Tim Whiteley, emphasized TCS’s established software track record, highlighting its adoption by exchanges globally, including those in Finland and Canada. He noted the reduced need for extensive customization in the new system.
Vivekanand Ramgopal, TCS’s president of banking products, in a news statement, has hailed the ASX contract as an endorsement of their expertise in mission-critical software.
The setback from ASX’s earlier blockchain initiative involved a substantial rewrite of code, leading to a A$176.3 million write-down and denting market confidence in the exchange, which boasts companies valued at a combined A$1.6 trillion.
The fallout prompted the Australian Securities and Investments Commission (ASIC) to initiate an investigation into ASX’s project disclosures. ASIC Chair Joe Longo acknowledged ASX’s decision but emphasized the need for detailed engagement with the market for the replacement program, stressing a realistic and achievable timeline.
While acknowledging the positive strategic shift, analysts raised concerns over the extended implementation timeline and lingering uncertainties regarding operational costs and capital expenditures.
ASX outlined an estimated cost between A$105 million and A$125 million for the initial phase, focusing on clearing software expected to be delivered around 2026. Decisions on the cost and timing for settlement and additional software are slated for 2024.