I have looked at this acorn video
https://www.youtube.com/watch?v=Gk1T_9-7_4g (and some others) for connecting an encoder to the spindle. In this video, they require one encoder revolution for one spindle revolution and use an encoder with a lot of wires. On some forums there is a request for an index pulse, others talk about quadrature differential inputs. For me, as an electronics/software guy, I read the requirements as
a quadrature encoder and index pulse and one index pulse per spindle revolution. This fulfills the "one encoder revolution for one spindle revolution"requirement and also a requirement for rigid tapping.
Your encoder is a 5 Volt quadrature encoder (A/B outputs) with index pulse (Z output) . For me, this should work.
You have to check the manual for your controller to be sure or ask acorn (centric)