ASX selects Tata for clearing and settlement system after ditching blockchain project
The ASX-Tata partnership marks a strategic shift in the direction of the CHESS Replacement program, reflecting a move away from blockchain to a more traditional database system, albeit with potential for future blockchain integration.
The Australian Securities Exchange (ASX) has made a pivotal decision to collaborate with India’s Tata Consulting Services for the redesign and reconstruction of its 30-year-old clearing and settlement system, a move that has surprised market observers and overshadowed Nasdaq, previously considered the favorite contender for the project.
ASX aims to replace the CHESS infrastructure with software licensed from Tata, at a projected cost of up to $125 million for the first stage. This decision follows a year after ASX abandoned its plans for a blockchain-based system, a move that had attracted criticism from shareholders and regulators.
“Focus on engaging with the market on the detailed design of the CHESS Replacement”
Australian Securities and Investments Commission (ASIC) chairman Joe Longo acknowledged the significance of this decision but cautioned that there is still a considerable journey ahead in delivering this critical infrastructure upgrade. “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,” he advised.
Reserve Bank of Australia (RBA) governor Michele Bullock emphasized the importance of addressing findings from various external audits and reviews to avoid repeating past issues with the program. “The Advisory Group’s input will remain critical throughout the implementation phase of the replacement solution,” she stated, stressing the need for robust governance in managing the complexities of this project.
The ASX-Tata partnership marks a strategic shift in the direction of the CHESS Replacement program, reflecting a move away from blockchain to a more traditional database system, albeit with potential for future blockchain integration.
The project involves a staged approach, with an initial focus on upgrading the clearing service, followed by the settlement and sub-register services in a later phase.
Industry observers, including Liberal Senator Paul Scarr and Stockbrokers and Investment Advisers Association CEO Judith Fox, have underscored the importance of meaningful engagement and consultation during the project planning stage.
ASIC and RBA, as co-regulators of licensed clearing and settlement facilities, have increased their monitoring of ASX, reflecting the critical nature of this infrastructure upgrade.
The project’s complexity and technical demands necessitate strong and transparent governance arrangements, with a focus on maintaining the resilience, reliability, integrity, and security of the existing CHESS system until its replacement is complete.
