ASX says investment in blockchain tech puts it ahead of game

ASX chief Dominic Stevens says early investment in blockchain-based tech has put it in a world-leading position.

ASX chief executive Dominic Stevens.

ASX chief executive Dominic Stevens says the sharemarket operator is not opposed to competition and that its early investment in blockchain-based technology to revolutionise equities clearing and settlement has put it in a world-leading position.

Over the past year, the ­company had been consulting with the market on the replacement for the legacy CHESS ­equities settlement system. Its distributed ledger technology, which it developed with US group Digital Asset Holdings, is in trial mode and a decision on whether or not to ­proceed with deployment is on track for December, Mr Stevens told shareholders at the ­company’s annual general meeting in Sydney yesterday.

“ASX is not opposed to the ­notion of competition. We see our goal as providing the best and most efficient service to our ­customers,” Mr Stevens said.

“It is important, however, that the customers who eventually pay the costs arising from fragmenting the market receive tangible net benefits.

“Feedback from the recent consultation undertaken by the regulators found that most stakeholders who replied were ­concerned about the potential risks and inefficiencies that could arise from having multiple clearing and settlement providers.”

The government has ­previously endorsed recommendations to allow competition in equities clearing.

Mr Stevens said he believed the market wanted less — not more — complexity and that the benefits of increased competition had not outweighed the costs.

“Many feel the quality of the market has been affected,” he said. “In any event, a potential change in market structure underlines the good sense of ASX making an early investment in the exploration of distributed ledger technology. We are in a world-leading position in understanding whether the technology could provide significant efficiency gains for our customers.”

It was Mr Stevens’s second AGM in the CEO role, after he took the helm in August last year. His first AGM, last September, was overshadowed by a hardware failure earlier in the month that shut down the stock exchange for nearly a full day of trade.

Responding to a question at yesterday’s meeting on how the company would guard against a blackout amid expectations of power outages in the coming summer, ASX chairman Rick Holliday-Smith said the company had invested in a diesel generator.

“We have significant disaster recovery setups so if the power grid were to go down the generator will kick in and can operate for a number of days. A significant amount of work goes in to make sure the power to our facilities remains online the whole time.”

The bourse operator recently booked a net profit after tax of $434.1 million for the year through June, a 2 per cent increase year on year. Mr Stevens said the group was developing a global “sweet spot” for companies in the $50 million to $500m market cap range, underpinned by the market’s liquidity and corporate governance standards. The bourse listed more companies than any other major ­exchange in 2016 and attracted more than 100 foreign listings over the past three years.

ASX shareholders yesterday approved an increase of the cap on the company’s pay for its non-executive directors, from $2.8m to $3m. This was in response to the number of ASX directors lifting from nine to 10, Mr Holliday-Smith said.