The Australian exchange operator is partnering with TCS for long-term overhaul of trading software

By Himanshi Akhand

(Reuters) – Australian stock exchange operator ASX Ltd said on Monday it had struck a deal with TATA Consultancy Services (TCS) to design and replace its trading, clearing and settlement system, following months of setbacks since the last blockchain-based audit of the system. year.

ASX said it would implement the new product-based platform in two main releases, with the clearing service to be delivered in a first release, and the settlement and sub-registration services in a second release.

The estimated cost of the first release of the Clearing House Electronic Subregister System (CHESS) project is between A$105 million ($68.33 million) and A$125 million, to be incurred over several years, the ASX said.

“ASX believes that the selected product will allow it to deliver a reliable, supportive and scalable platform that meets the needs of the Australian market now and into the future,” it said in a statement.

The ASX’s first attempt to overhaul CHESS drew reprimands from the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia, with the regulators demanding more thorough reporting on plans to update the 30-year-old software.

ASIC had also opened an investigation into ASX’s public disclosures about the earlier project before it was shelved.

ASX had sought to replace its aging all-in-one legacy CHESS software using blockchain-based technology, but abandoned the overhaul last November, citing dysfunctional management, concerns about product complexity and scalability, and difficulty finding experts to support it.

In other major financial markets, clearing and settlement, or confirming the transfer of share ownership and updating share registers, are managed by separate entities to the market operator, and the initial failed CHESS overhaul prompted Australia to pass laws encouraging competition to break up the ASX. monopoly on clearing and settlement.

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“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,” ASIC chairman Joe Longo said in a separate statement.

“ASX will also need to ensure that existing CHESS continues to be maintained to meet ongoing requirements for resilience, reliability, integrity and security,” ASIC added.

The estimated timeframe for implementation of the first release is 2026 and for the second release is 2028 or 2029, the ASX said on Monday, adding that further stakeholder consultation for the next phase of the CHESS replacement project is set to start in the first quarter of 2024.

ASX also entered into an agreement with Accenture to provide additional capacity and capability in project delivery.

“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,” said ASX CEO Helen Lofthouse.

TCS did not immediately respond to a request for comment. Accenture had no comment on the matter.

($1 = 1.5366 Australian dollars)

(Reporting by Himanshi Akhand in Bengaluru Editing by Chris Reese and Diane Craft)