Published on the 21/11/2023 | Written by Heather Wright
No blockchain required, thanks…
Tata Consultancy Services will deliver the Australian Securities Exchange’s replacement Chess system – the first stage of which is expected to cost up to AU$125 million – as the ASX looks to move on from its blockchain debacle.
The deal will see TCS providing its BaNCS for Market Infrastructure offering – a modular technology platform for the clearing and settlement services which underpin the sharemarket. It’s already in use in markets including New Zealand, South Africa and Finland.
“It will be critical for ASX to focus on engaging with the market with a realistic and achievable timeline for implementation.”
It’s a big departure from earlier plans for an ambitious blockchain-based offering to be provided by US startup Digital Asset.
Announced back in 2017 after two years of ‘considering options’, the project, once hailed as the world’s first industrial-scale blockchain case and initially due to go live in 2020, was dumped last year after multiple delays. It saw the ASX take an AU$176 million write-down and the launch of an ASIC investigation into whether the ASX and its directors and officers breached legal obligations during the failed project.
The planned offering is abandoning distributed ledger technology and opting instead for a more traditional database. However, BaNCS does have the option to add blockchain support.
It will also minimise customisation needs and enable a staged implementation.
Accenture, which was called in to conduct an independent review of the failed Chess replacement, will support ASX’s project delivery, acting as a solution integrator and providing additional capability and capacity for delivery and industry expertise.
Joe Longo, ASIC chair, says the selection of TCS is ‘an important decision’ by ASX, but noted 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.”
The ASX says the BaNCS solution will provide improved scalability to support future market growth and enables reuse of industry investments relating to workflow development and global messaging standards – though it notes that’s ‘subject to consultation’.
The modular architecture will enable un-affiliated market operators and clearing and settlement facilities and other providers to access and interoperate with individual clearing, settlement and sub-register services using standardised interfaces.
In June, Labor Senator Deborah O’Neill claimed during a senate enquiry that the US stock exchange Nasdaq, which also develops exchange platforms, had been chosen as the development partner. She cited an unnamed source, saying Nasdaq had been formerly engaged or was sufficiently advanced in the selection process as the replacement program partner.
Her comments prompted surprise from Longo, who was appearing in front of the Committee, and who said at the time he didn’t expect the replacement platform and program to take any real shape much before the end of the year.
The ASX had been given until the end of the year to come up with a plan for the system.
The ASX says the new platform will come in two main releases, with the clearing service, costing between $105 million and $125 million, delivered first, followed by settlement and sub-register services in the second release.
The scope, timing and cost of the second release is expected to be determined late next year following stakeholder consultation.
Briefings with key industry and other stakeholders on solution design and industry work plan is planned, with formal consultation on the high level project plan and timeline commencing in Q1 2024.
“This staged approach is expected to reduce overall delivery risk and should help manage impacts on industry stakeholders as compared to a single cut-over approach,” the ASX says.
The project is now expected to finish in 2029, 12 years after it first began.
The ASX is due to stress test its existing 25+ year old system next month to ensure it can meet trading volumes for 2032 – the date ASIC has asked ASX to consider plans for Chess to run to.
The failed blockchain-based Chess replacement project is under investigation by ASIC. It’s looking at whether the ASX and its directors and officers breached legal obligations during the project.