After seven years of unsuccessful attempts to implement a blockchain settlement system, the Australian Stock Exchange (ASX) has officially abandoned its plans and selected India’s Tata Consultancy Services (TCS) to overhaul its settlement service. ASX, one of the world’s top 20 largest stock exchanges, had initially sought to replace its Clearing House Electronic Subregister System (CHESS) with a blockchain alternative in partnership with Digital Asset Holdings in 2016. However, the project faced significant challenges, leading to its eventual scrapping earlier this year.
TCS Chosen for Maturity and Technology: ASX Chief Information Officer Tim Whiteley confirmed that TCS was chosen for its “mature product and technology,” emphasizing that the level of customization required is minimized. This decision comes in the aftermath of the failed partnership with Digital Asset Holdings, where the New York-based startup faced difficulties handling the ambitious task at hand. The ASX-TCS collaboration aims to bring about a gradual and carefully executed transformation, learning from the previous experience that resulted in substantial financial losses and raised questions about the exchange’s governance.
ASX’s Long-standing Reliance on CHESS: Having relied on CHESS for nearly three decades, ASX found itself lagging behind other global exchanges that had transitioned to faster and more efficient digital settlement systems. The decision to explore blockchain technology was a response to industry trends, but the ambitious nature of the overhaul and the selection of a relatively small partner led to significant setbacks.
Learning from Past Mistakes: Acknowledging the shortcomings of its previous approach, ASX is now adopting a phased strategy for implementing changes over several years. Whiteley revealed that the exchange anticipates completing the overhaul by 2029. This cautious approach contrasts with the initial attempt, where ASX sought a complete system overhaul, ultimately resulting in a write-down of approximately $155 million. The failure prompted calls for the board’s resignation and triggered investigations by the Australian parliament and the securities regulator.
Blockchain Technology Not at Fault: Despite the setback, it’s important to note that the failure of the project reflects on the execution by the involved entities rather than the blockchain technology itself. ASX’s decision to pivot to TCS demonstrates a commitment to learning from past mistakes and ensuring a more methodical and successful implementation of a modernized settlement system.
ASIC’s Perspective and Support: The Australian Securities and Investment Commission (ASIC), which launched an investigation into the blockchain project’s failure, supports ASX’s decision to partner with TCS. ASIC Chair Joe Longo acknowledges the progress made but emphasizes that “there is still a long way to go to deliver a CHESS replacement.” Longo urges ASX to engage with the market in detailing the Chess replacement program, emphasizing the importance of a realistic and achievable timeline for implementation.
ASX’s decision to abandon its blockchain settlement plans and collaborate with Tata Consultancy Services marks a significant shift in strategy following years of setbacks. The exchange’s acknowledgment of the need for a gradual and carefully executed transformation, coupled with the selection of a partner with a mature product and technology, reflects a commitment to learning from past mistakes. As ASX embarks on this multi-year overhaul, the industry will be closely watching to see how the exchange navigates the challenges and successfully delivers a modernized settlement system, meeting both regulatory expectations and market demands.
