The Australian Securities Exchange (ASX) is building the world’s first actual industrial-scale blockchain use case — a new post-trade solution to replace its legacy Clearing House Electronic Subregister System (CHESS) platform, which has been running for around 25 years.
The project has global traction, with ASX CEO Dominic Stevens saying during the organisation’s first-half results call on Thursday that the first question he’s asked when overseas on business has always been about CHESS.
“The intensity of interest has only increased over the last year,” he added.
The system is ready for industry-wide testing in July, but the ASX is working on more than just CHESS. According to Stevens, the “ASX has never been busier”.
“We’re making long term investments in the future of our core underlying franchise by improving the management of enterprise risk, enhancing our risk culture, and we’re undertaking a significant contemporisation of the technology stack here,” he said.
“We’re also enhancing our products and services … with an eye to customer value. And finally, we’re investing in adjacencies that have the ability to produce significant revenues over the medium term.”
S&P/ASX All Technology Index
The launch of the S&P/ASX All Technology Index is currently scheduled for later this month.
According to Stevens, the index — with its own code, XTX — will enhance the profile and understanding of the tech sector in Australia. He said it would also increase opportunities for investors.
“Mirroring the increasing importance of technology to the ASX as a company has been the rise of technology as an industry sector on our exchange,” the CEO said. “This is a further step along the path of ASX developing a globally respected listed technology sector.”
In its financial results, the ASX said the index has come in response to customer requests.
ASX and third-party data with DataSphere
The ASX’s DataSphere platform opened during the last half, and by the end of this half, Stevens said the majority of ASX’s data catalogue will be curated and loaded.
“This platform is providing a big data solution for ASX that can be also accessed and leveraged by customers,” he explained. “Along our theme of having a more open solution for everyone.”
DataSphere is touted by the ASX as an open data science platform that supports analytics and machine learning. The selling point is that customers can access ASX and third party data to solve problems. It also allows customers to commercialise their data and analytics.
The platform is operational, the web store is open, and the first data products are available. Stevens said the platform is “ready to go” after the process of “getting all the data there”.
“The curation and cleansing of the data is actually incredibly detailed and a significant task … we’re heading towards completion on that,” he added.
The ASX is now having discussions with financial institutions to show them the value of jumping on board.
E-conveyancing done Sympli
Also allowing the ASX to pursue adjacencies that leverage its expertise and technology infrastructure is the e-conveyancing platform Sympli. Sympli blends ASX’s payments infrastructure with InfoTrack’s conveyancing expertise on a “modern technology platform”.
“Here ASX is the challenger rather than the incumbent. We’re building what we believe is a superior solution that will integrate better with the banking and conveyancing market,” Stevens said.
“I’m pleased to confirm that we’re connected to the RBA and connected or connecting to two of the majors, and this has allowed Sympli to complete its first financial conveyance, as well as other transactions, and we’re confident that the remaining connections will take place over the course of 2020.”
According to CFO Gillian Larkins, the delay is at the bank’s end.
“The technology is good. It’s just an element of connectivity with the banks that we’re actually — that’s why there’s a delay,” she added.
ASX Net upgrade and a second data centre
Slated for completion this year, the ASX Net upgrade is an overhaul of its external connectivity network. The exchange is touting it as being customer-focused, allowing for standardised, consolidated, and faster communication.
Stevens said the work ASX has done over the last five years to grow its Australian Liquidity Centre (ALC) ecosystem is paying dividends.
“We’re attracting new customers, filling additional cabinets, providing fresh connections,” he said. “ALC has lowered the total cost of ownership of these services for many users over many years.
“With our new secondary data centre, it’s a significant upgrade that replaces the facility that faithfully supported the exchange for the last 20-plus years.”
Stevens said the newer facility would enable a low risk of failover and provide a better backup. It’s due for completion at the end of this fiscal year.
Speaking at VMworld in San Francisco in August, ASX CIO Dan Chesterman said the exchange makes more money from selling technology services to customers than pure trading fees.
“The reality is, technology services, as a business, has grown at about 10% a year for eight years and the comparison is on fees for the cash equity trading, which is a portion of what you get from trading … the reality is we don’t have a technology services business if we don’t have trading … our technology services is a growing business,” he told ZDNet.
Trading platform upgrade, a new website, and a thirst for more
ASX is also upgrading the ASX trade equity trading platform. Stevens said the platform will be more resilient with increased systems performance. It will also have the ability to introduce new functionalities more efficiently and is due for completion at the end of this fiscal year.
The ASX on Thursday also “softly” launched a new website, which will operate in parallel with the current site for the next few months. Stevens said this was done to give users time to explore and become familiar with the new site before switching over fully.
“ASX has been working on upgrading, consolidating multiple web presences for some time, especially to make them more contemporary and usable,” he said. “And at the end of this calendar year we plan to begin rolling out a more comprehensive digital experience, which will include an enhanced issuer portal with richer functionality.”
But back to blockchain
As much as the exchange tries to subdue the excitement around CHESS, there’s no denying the gravity of the project. It’s also offering the exchange additional revenue streams.
“We’re very excited about the long term benefits this can bring to clearing and settlement specifically, and to the efficiency of the securities industry in Australia, generally,” Stevens said.
“The opportunities a DLT-enabled CHESS offers are being recognised by customers and third parties and these opportunities are developing in a range of areas including risk management and process automation.
“Of course, while these opportunities are exciting, our focus is firmly on getting CHESS replacement projects completed.”
Stevens said that due to the ASX being perceived as a leader in the DLT space, it’s being approached for help by other industry players.
“These things I put them in more the longer term bucket, but it’s actually starting to set up optionality within ASX, which has a very, very strong core business, and actually gives us areas to grow into,” he said.
“ASX’s current and future strategy is not about replacing CHESS or upgrading the futures system. We’re actually transforming our entire technology stack from the operational databases and communications infrastructure we use to the way we deploy distributed ledger, cloud, big data, AI tools,” Stevens continued.
“We’re excited about the future opportunities that the new infrastructure will create for us, and the marketplace, and in particular we’re energised how these technologies, actually can be leveraged by our customers to improve their businesses and how we can help them to do this.”