ASX Hires Tata Consultancy Services to Overhaul Its Clearing and Settlement Software

Australian Securities Exchange (ASX) on Monday said that it has hired global technology provider and India’s Tata Consultancy Services (TCS) to overhaul its clearing and settlement software, opting for a route that will take less customisation after ditching a much-criticised blockchain-based effort.

ASX has completed its reassessment of the solution design to replace Clearing House Electronic Subregister System (CHESS) and will proceed with a product based solution to be delivered by TCS. CHESS replacement project will now move to the next phase of detailed design and implementation, with further stakeholder consultation to commence in the first quarter of 2024.

ASX and TCS signed the agreement for the delivery of TCS BaNCS for Market Infrastructure product, which offers a modular technology platform for clearing and settlement services. 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 will also satisfy the licence obligations of ASX Clear and ASX Settlement, and is capable of supporting potential new services and innovation from ASX or other providers.

ASX wants to implement the new platform in two main releases, with the clearing service to be delivered in a first release, and the settlement and sub-register services to follow in a second release. This staged approach is expected to reduce overall delivery risk and should help manage impacts on industry stakeholders, as compared to a single cut-over approach.

Stakeholder input has been key to today’s decision, which included those from the CHESS Replacement Technical Committee, the ASX Business Committee and the Cash Equities Clearing and Settlement Advisory Group (Advisory Group).

The next formal consultation with stakeholders will commence in the first quarter of 2024 and will cover the high level project plan and an indicative timeline for the releases, including the design, scope and timing for each of the releases. The indicative timeframe for implementation of the first release (the clearing service) is 2026, and the scenarios being considered for the second release (the settlement and sub-register services) estimate implementation in 2028 or 2029. The delivery timeframes are subject to a number of factors including stakeholder consultation and detailed planning.

The estimated cost for the first release (clearing) of the project is between $68.84 million and $81.95 million, to be incurred over multiple years, with the FY24 capital expenditure component captured in ASX’s existing FY24 capital expenditure guidance. The scope, timing and cost of the second release (settlement and sub-register) is expected to be determined in late 2024 following stakeholder consultation.

 Product Benefits

The TCS product is used to provide services in multiple markets worldwide, including in Finland, South Africa and New Zealand, and is currently being implemented in Canada. It has been significantly developed over recent years to accommodate the diverse clearing and settlement models and account structures used in different regions globally.

This includes support of direct holding structures, which is expected to minimise the amount of customisation required to support the Australian market. At the same time the product’s design is well suited to supporting the introduction of new features and services in the future.

ASX’s medium term capital expenditure plans will be supported by ASX’s flexible capital management strategy including the expected issue of a corporate bond of between $131.12 million and $196.68 million (subject to market conditions) and a dividend pay-out ratio range of between 80% to 90% of underlying net profit after tax.