Questions regarding reliability, transparency and scalability came to the fore after the multi-asset exchange company Australian Stock Exchange (ASX: ASX) decided to replace its 25-year-old clearing and settlements system CHESS with blockchain tech in 2016. To do so, the ASX brought on the New York-based tech startup Digital Asset.
However, after multiple delays and issues, the partnership turned sour. Both parties claimed that the other was responsible for the project’s failure. Millions went down the drain (triggering a write-down of $250 million), and the incident made regulators lose confidence in the ASX, with ASIC Chairman Joe Longo saying, “This is an extraordinary example of hubris on the part of ASX.”
In 2022, a harried ASX terminated the project.
Now, ASX has announced a new replacement plan—it is adopting a product-based solution to be delivered by global technology provider TATA Consultancy Services (TCS). The CHESS replacement project will move to the next phase of detailed design and implementation, with further stakeholder consultation to commence in the first quarter of 2024.
ASX Managing Director and CEO Helen Lofthouse said, “When we took the decision to reassess the CHESS replacement solution design, we wanted to select a solution that would serve the whole market, and to do that we needed extensive input from our customers and industry stakeholders. We significantly increased engagement during 2023, and the selected product, implementation approach and scope reflect discussion and feedback from various forums.”
TCS will deliver its TCS BaNCS for Market Infrastructure product (a software suite supporting end-to-end and post-trade functions). It comprises a modular technology platform for clearing and settlement services. ASX considers that the chosen product will allow it to provide a reliable, supportable, and scalable platform that meets the needs of the Australian market.
ASX plans to implement the new platform in two main releases. The clearing service will be delivered in the first release, and the settlement and sub-register services will follow in the second release. This approach is expected to reduce overall delivery risk and help manage impacts on stakeholders.
The first release is set to happen in 2026, while the second is estimated to be out in 2028 or 2029. These timeframes depend on some factors, including stakeholder consultation and detailed planning. The estimated cost for the project’s first release is between $105 and $125 million, to be incurred over multiple years. It is yet to be determined for the second.
Seeing as the Company received a lot of criticism from stakeholders after failing to see through the prior project, stakeholder input has been critical to the new decision, including input from the CHESS Replacement Technical Committee, the ASX Business Committee and the Cash Equities Clearing and Settlement Advisory Group. The next formal consultation with stakeholders will commence in the first quarter 2024. It will cover the high-level project plan and an indicative timeline for the releases, including the design, scope and timing for each release.
Since the CHESS replacement ordeal is no small one, ASX has also brought on Accenture to support ASX’s project delivery as a solution integrator. Accenture will provide additional capability and capacity in technology project delivery and industry expertise.
Lofthouse added, “This next phase of the project will be a multi-year undertaking and ASX will maintain our investment in the current CHESS platform to ensure it continues to operate efficiently and reliably until the replacement is implemented.”
There is a lot at stake for ASX, having to make up for the eight years and billions spent on a failed project. Perhaps this reputation management bid compelled the Company to opt for renowned names instead of a startup.
Alinda is a Business Reporter for The Sentiment
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