Australian stock exchange apologizes for ditching blockchain upgrade

Australia’s stock exchange has apologized for abandoning a year-long plan to upgrade its clearing and settlement system to a modern blockchain-based platform after a series of delays.

The Australian Securities Exchange’s move to scrap upgrading its clearinghouse system is calling for time on a project that critics say has cost the country a head start in developing a more efficient trading system.

ASX chairman Damian Roche apologized for the disruption caused by the botched upgrade. “We have concluded that the path we were on will not meet the high standards of the ASX and the market. There are significant technology, governance and delivery challenges that need to be addressed, he said.

Australian regulators had given ASX control of the project to promote more efficient trading. In contrast, the EU has launched a technology pilot to trial distributed ledger technology for stock trading, and the UK Treasury is set to follow suit.

The project, which was launched seven years ago, has been characterized by repeated delays in the implementation of the system. The ASX will order a charge of A$250mn ($168mn) after admitting it had to start over.

Philip Lowe, the governor of Australia’s central bank, said the banking industry had incurred significant costs and any write-downs would have to be fully borne by the ASX.

– The announcement from the ASX after many years of investment from both the ASX and the industry is very disappointing. The ASX must prioritize developing a new plan to deliver safe and reliable clearing and settlement infrastructure,” Lowe said.

Banks and financial services companies are estimated to have spent up to US$150 million preparing for the upgrade.

The decision to abandon the blockchain upgrade followed a review by Accenture that revealed major flaws in the design of the software, developed by a company in which the ASX has a stake, and called into question its ability to ever launch.

David Farrell, chief executive of trading platform FinClear, blamed the ASX and regulators for “blindly” accepting that the upgrade would deliver on its original promise.

– It is not the technology that is the problem. It’s the implementation,” he said, noting that his company has developed trading platforms using the same system that the ASX has discontinued.

Farrell said the replacement for the ASX’s upgrade could be obsolete by the time it arrives in two to three years.

“We are now falling behind the rest of the world,” he said, arguing that other markets such as Britain and the EU have created “sandboxes” to foster innovation outside the traditional clearinghouses, something Australia has failed to do.

He said there was a risk that regulators could force a breakup of the ASX by separating the exchange from its clearing business. “It would be to the long-term benefit of the market and to the detriment of the ASX,” he said.

The ASX shares closed flat on Thursday but have fallen by almost a quarter this year to a market value of $13.6 billion.

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *