ASX boss Dominic Stevens talks up blockchain boon

ASX chief Dominic Stevens says the use of distributed ledger technology will deliver meaningful cost savings to stockborkers.

ASX chief Dominic Stevens addresses the annual stockbrokers conference. Picture: Hollie Adams.

An upgrade of the ASX’s core post-trade processing system and the use of distributed ledger technology will deliver stockbrokers meaningful cost savings and other benefits, the exchange’s chief, Dominic Stevens, says.

Mr Stevens said while it was difficult to pinpoint the efficiency gains of moving to a system that draws on distributed ledger technology, he expected cost benefits for the stockbroking industry of more than 1 per cent.

“It’s a low bar to think that a fully implemented DLT system would give the industry a mere 1 per cent cost benefit,” he told the Stockbrokers and Financial ­Advisers Association annual conference yesterday.

“Even if this 1 per cent is correct, ASX would be adding value to the industry that are multiples of the current settlement fees.”

Mr Stevens’s comments came after some angst around the project for not providing clarity to stockbrokers on the costs and benefits of the new systems. DLT, often referred to as blockchain, is a digital system that allows transactions to be recorded in multiple places at one time.

Mr Stevens said the ASX wanted to remain independent in providing the trading infrastructure and systems rather than competing with the stockbroking community. “We are not looking to compete with people in this room,” he said.

He also clarified that the ­upgrade of the core CHESS system would provide some choice to brokers on how they participated, including opting out of connecting through the DLT net­work of computers, called nodes.

The new system, which facilitates the clearing and settlement of trades, is being prepared to go live in 2021.

“A DLT-based CHESS system gives ASX and the marketplace a foundation for the next 20 years upon which to generate significant efficiencies,” Mr Stevens said, adding that had the ASX not chosen to include DLT in the ­upgrade, it would have been a “major missed opportunity”.

On the issue of cyber risks that may emerge from moving to a new trading platform, Mr Stevens was adamant that defences would be stronger because the system would provide an “extra layer” of security. “It actually allows us to address cyber issues better ­because it’s more modern technology and more modern hard­ware,” he said.

Mr Stevens also noted the ASX had beefed up resources and spending in the cyber risk area over the past three years.

“The amount of spending and resources … has not gone up by 20 per cent or 30 per cent, it has gone up by multiples,” he said.

“ASX has got multiples of the people working on that than it did a few years back and it is spending multiples of the money.”

He also gave stockbrokers more insight into the ASX’s strategy of attracting more listings from companies based overseas. His presentation showed that 126 offshore-based companies had ­floated on the ASX over the past five years, raising an ­average of $42 million apiece.

This month’s initial public ­offering of app company Life360 was the ASX’s largest-ever technology listing out of the US.

The push by the ASX to lure offshore-based companies follows several years of weak IPO activity, as several large floats, ­including that of Latitude Financial and Quadrant Energy, were shelved. Quadrant was divested in a trade sale while Latitude may revisit a listing at a later date.

Mr Stevens emphasised yesterday that technology companies were a big focus for the ASX as it looked to diversify away from its traditional sectors.

“Technology is not only a key plank of ASX’s own business ­development, but it is also a key part of our listings growth strategy,” he said. “We now have approximately 200 listed tech companies — our second largest sector behind resources.”