Dominic Stevens, CEO of Australia Stock Exchange, says the firm is updating its entire technology stack, from operational databases and communications infrastructure to how it deploys tools using distributed ledgers, cloud and artificial intelligence.
“We’re not just replacing Chess or upgrading our futures trading system,” he said in an address to analysts and media last week regarding the ASX’s half-year results. “For the next five to 10 years, no company can compete if it is operating on technology that is materially older than that of new entrants.”
For the past few years, ASX has attracted a lot of media attention for its plans to replace its post-trade equities infrastructure, Chess, with a distributed ledger built by Digital Asset. It is the first ambitious blockchain-related project by a major financial firm.
This program is still on track, but forms part of a greater strategy “beyond what the media will report on our distributed ledger technology,” he said.
Tech-driven revenue gains
Stevens devoted most of his report to technology, in support of the firm’s financials. His focus shows the extent to which technology has become paramount in the exchange industry, permeating every function.
1H20 revenues were up 7.1% versus 1H2019, with tech playing a role in many of those gains.
Stevens attributes new revenues in part to a new platform for equities trading, and new execution services combined with data and technology. ASX also generates revenues from information services data, such as adding machine-readable data for benchmark indices such as BBSW (for short-term interest rates, the Aussie equivalent of Libor).
The firm has put in place new infrastructure to support the market. This is now paying off in new applications to streamline operations for users and make it easier for members to do business, as well as to help ASX extend its business into new areas, what Stevens calls “adjacencies”.
We are getting enquiries about what D.L.T. can doDominic Stevens, ASX
He ticked off tech solutions in a variety of traditional functions: operations, risk management, governance, listing rules, corporate actions processing, and compliance.
Infrastructure upgrades go beyond the prominent case of replacing Chess. It includes front-office projects such as upgrading the equities trading platform and launching a new website, as well as deep-in-the-weeds stuff like modernizing its backup data center and boosting data security.
Even new listed products are being cast in a similar vein: Stevens highlighted a new index product from Standard & Poor’s tracking locally listed technology companies. “This will raise the profile of the listed technology sector in Australia,” he said.
New business opportunities
Stevens sought to move the spotlight from the Chess replacement project to new business opportunities coming into focus thanks to overall infrastructure improvements.
One direct outcome of the new post-trade system is offering consulting and solutions in distributed ledger technology. Its start is modest, with an initial focus on things like helping train others in Digital Asset’s programming language, but with more fundamental projects in view.
“There is a lot going on in the background,” Stevens said. “A lot of people are looking at what they can actually do with DLT…We are getting enquiries not around Chess but about what DLT can do…We are starting to set up optionality in ASX. We have a strong core business but this is an area we can grow into.”
Two other projects that should garner more attention include DataSphere, a big-data library for ASX customers, and Sympli, which directs ASX’s existing payments infrastructure to the world of conveyances (title deeds for property). Sympli was built with local vendor InfoTrack to digitalize conveyances, a domestic industry that resembles insurance with its many independent agents, and trade finance with its plethora of different types of users all using paper-based processes.
We are starting to set up optionality in A.S.X.Dominic Stevens, ASX
“This is a case in which ASX is the challenger, not the incumbent,” Stevens said, noting that it has recently gotten Reserve Bank of Australia and two of the country’s Big Four commercial lenders to sign up to this platform.
It’s an example of how technology continues to blur lines and enable firms to enter non-traditional spaces.
The Chess replacement project – which to the frustration of writers everywhere still lacks a product name – is on track to begin industry-wide testing in July 2020 and go live in April 2021.