- The Australian Stock Exchange has decided to overhaul its clearing and settlement software, abandoning a 2017 blockchain initiative
- The attempt to integrate blockchain faced delays and complaints, causing it to be halted last year
- The exchange’s shift away from blockchain technology indicates challenges and uncertainties, impacting broader sentiments toward blockchain adoption in financial markets
The Australian Stock Exchange, ASX, has chosen Tata Consultancy Services (TCS) to revamp its clearing and settlement software following a failed experiment to run it on blockchain technology. This shift marks a departure from ASX’s 2017 decision to take the lead in adopting blockchain-like technology, a move plagued by delays before being postponed last year. The failed experiment doesn’t bode well for other stock exchanges looking to implement the technology, or blockchain adoption in general.
Delays and Complaints
ASX announced a blockchain trial at the height of blockchain mania in December 2017, stating that it would replace its existing CHESS (Clearing House Electronic Subregister System) with distributed ledger technology developed by its technology partner Digital Asset.
The exchange boasted that its use of blockchain gave it the opportunity to “replace
CHESS with a next generation post-trade platform using contemporary technology,” but the reality hasn’t lived up to the expectation; in 2020, Computershare, one of the main share registry companies in Australia, asked for a two-year delay in implementation because it had not been given the necessary technical, operational and regulatory information on how the new system would operate or the fees that would be charged by the ASX for existing and new services.
Project Was Halted Last Year
Worse was to come the following year when Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC), took the unprecedented step of imposing conditions on ASX’s license over its switch to blockchain technology. ASIC warned that the new system would reduce the liquidity and transparency within the markets, two elements crucial to a healthy market.
After multiple delays, in August 2022 a company was commissioned to look into the state of the project, with the consultant’s report identified problems including timelines, communication, and complexity, and suggested that its implementation, which the ASX had indicated as “near-ready”, was no more than 63% complete.
All Eyes on London
In the aftermath, in November, the ASX halted the project and said it would write off as much as A$255 million ($173 million) in technology costs. TCS will now set about rectifying the issues and building a new system without blockchain technology, with estimates of more than A$100 million ($65 million) for just the initial stage.
ASX’s cautionary tale will alarm users of the London Stock Exchange, which recently accelerated its blockchain integration plans, although it seems that its tests have so far been more successful than those down under.