Australian bourse operator ASX Ltd said on November 20 it entered a deal with Tata Consultancy Services (TCS) to design and replace its trading, clearing, and settlement system, after months of backlash since pulling a blockchain-based overhaul of the system last 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-register services in a second release.
The estimated cost for 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 multiple years, ASX said.
"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 now and into the future," it said in a statement.
ASX’s initial attempt to overhaul CHESS earned rebuke from the Australian Securities and Investments Commission (ASIC) and 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 previous project before it was shelved.
ASX had been looking to replace its aging all-in-one legacy CHESS software using blockchain-based technology, but abandoned the overhaul in November last year citing dysfunctional management, concerns about the product’s complexity and scalability, and difficulty finding experts to support it.
In other major financial markets, clearing and settlement, or confirming the transfer of stock ownership and updating share registries, are managed by separate entities to the market operator, and the initial failed CHESS overhaul prompted Australia to pass laws to encourage competition to break up ASX’s monopoly over clearing and settlement.
"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 Chair Joe Longo said in a separate statement.
"ASX will also need to ensure existing CHESS continues to be maintained to meet ongoing resilience, reliability, integrity, and security requirements," ASIC added.
The estimated time frame for implementation of the first release is 2026, and for the second release is 2028 or 2029, ASX said on November 20, 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 a deal with Accenture to provide additional capability and capacity in the 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," ASX CEO Helen Lofthouse said.
TCS did not immediately respond to a request for comment. Accenture did not have a comment on the matter.
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