Australian Securities Exchange (ASX) today (Monday) announced its decision to replace its existing clearing and settlements system, CHESS, with the product-based solution of TATA Consultancy Services (TCS). ASIC and the Reserve Bank of Australia also acknowledged the decision to bring the new solution.

The Aim to Replace CHESS

The latest announcement came after the Aussie stock market operator abandoned its long-standing plan to replace CHESS with a blockchain-based infrastructure. ASX initially decided to bring a blockchain-based system in 2016 and officially backtracked from it on May 2023 after facing much backlash in infrastructure development.

“When we took the decision to reassess the CHESS replacement solution design, we wanted to select a solution that would serve the whole market, and to do that, we needed extensive input from our customers and industry stakeholders,” said the Managing Director and CEO of ASX, Helen Lofthouse.

A Proven Solution

The agreement with TCS for its TCS BaNCS for Market Infrastructure product is expected to provide a “reliable, supportable, and scalable platform.” Currently, the modular solution of TCS is being used by stock markets in Canada and has been selected by market operators in Finland, South Africa, and New Zealand.

“We had clear objectives for our selection process,” Lofthouse added. “These included meeting current and future market needs and our license obligations, enabling a safe transition from the incumbent platform, minimizing industry impacts where possible, and having the capability to provide interoperability and facilitate future innovation as driven by market demand.”

The stock market operator has proposed the implementation of the new platform in two main releases to reduce the overall delivery risks. The clearing service is expected to be delivered in the first release, while the settlement and sub-register services will be implemented in the second release.

The indicative timeframe for the implementation of the first release is 2026, while the implementation of the second release is expected to be in 2028 or 2029. ASX further highlighted that delivery timeframes depend on stakeholder consultation and detailed planning. The estimated cost of the first release is between AU$105 million and AU$125 million, to be incurred over several years, while the figure for the second release will be determined in late 2024.

Grinding progress from the $ASX. They've picked a replacement for CHESS (having wasted the prior 7 years) and so far haven't blown up the forecast financials (of course that could change). But progress nonetheless. pic.twitter.com/h96UevPP3H

— David Berthon-Jones (@berthon_jones) November 19, 2023

In addition to selecting TCS’ solution, ASX entered into an agreement with Accenture to support its project delivery as a solution integrator.

“[The] next phase 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,” Lofthouse said.