The ASX is one of the world's top 10 listed exchange groups by market capitalisation,
and occupies a place at the heart of Australia's financial markets.
Since he was appointed Managing Director and CEO in August 2016,
Dominic Stevens has pursued an ambitious strategy of technological investment to drive innovation
for the benefits of ASX's users, and to put Australia at the forefront of financial markets.
I'm Ric Deverell, Macquarie's Chief Economist, and I'm delighted to introduce Dominic to
tell us more. Dominic, welcome. Thanks, Ric. So the ASX investing very heavily in long term
transformation of its technology and operations. Most of us see this as the CHESS project
with blockchain GLT technology. But I know that your program is more than CHESS alone.
I was wondering what other new projects or services you're working on,
and how much is modernisation and how much is innovation or is it a combination of both?
Sure. Well there's, it has been a busy time at ASX. There's been a real transformation going
on. I think it's sort of like your once in 20, 25 year transformation of the technology at ASX.
A lot of that work has taken place in the last five years. What you read about in the paper a lot
is around the CHESS replacement because that's a big project. But when you, when you look back over
the last five years, we've replaced the Futures system, which was a system back from the 90s,
we replaced the Equity Market system. We've actually replaced all the communications
infrastructure which runs all the trading, clearing, and settlement communications between
the banks, the brokers and ourselves, and runs RITS, the, effectively the payment system for the
RBA. We've replaced surveillance systems, replaced risk systems, a new website, a new data center. So
there's been actually, you know, certainly a lot going on there. We've done a huge amount over a
short period of time and it's a busy program, but I think, you know, like what it is, it's actually
around the digitisation of the Australian financial system from our point of view.
And so effectively when you, a great example perhaps is in the last sort of two or three
weeks we actually finished a project which was the digitisation of the whole corporate actions
straight through processing. So now, which is more advanced than any other sort of like system around
the world, when an issuer goes to do a corporate action, he enters that digitally on a smart form.
That smart form gets verified and gets sort of like filtered through our systems and
then gets sent out via ISO 20022 global standard messaging to the investor market.
So that's all happening as we speak as well. So if, to go back to your original question
around modernisation and, you know, innovation, yes there's modernisation, there's new servers,
there's more efficiency, there's better security, there's all of those things, but
there's innovation around things like CHESS, which is effectively synchronising the whole way we do
the equity world in Australia. There's things like what I just said with corporate actions STP;
what we've done with our data center, where we've actually
basically created a community of people around the hardware and the communications. So I'd say
it's basically both and it's a lot of work, but it's been a very productive five years.
It really is interesting. And my sense is that a lot of people don't understand how
deeply embedded the ASX is in the broader economy and the leading role you're taking in this.
I mean, it's interesting to me that, of course technology is transforming the role of exchanges
and financial market infrastructure - like the ASX - but it's also doing
a lot of things just beyond your own offering. So I mean you've talked about democratising data,
enabling multi-payment collaboration. What does that actually mean for a layman? How
does that work? And what does that mean for your customers? I think, sort of like, to
take a step back, it's the actual more, less about how ASX interacts with the customer and more about
how the ecosystem interacts with itself. And so a great example of that which is already out there
is, I talked about the data center. So when I was on the board of ASX before I took this role and I
got taken out to the ALC, which is the liquidity center where all the technology is. And it was a
massive big room of concrete, like a cricket pitch made of concrete floors and concrete ceilings.
And there was the co-location at one end, there was just a whole lot of empty space, and there
was I think one bank at that stage at the other end. That room is now full. And what thats meant
is everyone could come in and collaborate. So it's not about my interaction with ASX,
it's actually my interation with ASX, but it's about Westpac interacting with the data provider or a
software vendor interacting with UBS, or all of these interactions happening in one spot. So
you know when you think about it, if you come to the ALC, you're basically one Cat 5 cable away
from anyone else in the industry. And I think that that's made us think and it plays out in a lot of
what we do, as far as, you know, if I think about, we were building a big data initiative
internally for ourselves. We thought, well hold on, why are we just doing this for ASX,
we should be doing it for the community. So now that's something that's accessible to
others out there with our data, with their data, they can bring their technology, we can bring
our technology, could it be something that a Fintech uses - just trying to make that actually
a more collaborative sort of like ecosystem of data rather than just than ASX's data.
And I think CHESS is actually just a large example of that. And so what CHESS is, in the main is,
old CHESS or the way we used to work was I used to deal with you. So if you want to know
whether your position was correct, because I'm the source of truth, you dealt with me and you
knew that, but that's all you knew. So when you go to a distributed ledger, what you're
going is from a unilateral relationship with me or multilateral relationship with the market.
So you now know that you've got what I've got, but you know that everyone else
has actually is synced at that same level. And so what that means is, is that we're all in sync,
on an immutable ledger, it's all in real time. And the beauty of it also is, is that, that technology
is allowing smart contracts to be built on top of that. And so we've got the same data structures
in multi institutions, such that actually technology can be built on top of that.
And if it's built on top of it here, that same technology will work over there on someone else's
instance of it. So it actually allows, not really just ASX, but actually the market to
go forward and build things on top of this, and it's actually a platform for the next 20 years.
So, you know, I think when we first built this, one of the things that we were worried about was,
you know, you don't want to build a technology that you only want to roll out every 20,
25 years and actually think, "Oh gee, I wish we'd used put that sort of infrastructure below it".
So now we put that infrastructure below it, it's going to take some time for the market to actually
build to that. But, day one, and I think this is the important thing for us in the first sort of
few years of this is we're moving $2-$3 trillion dollars of securities
onto this system to upgrade that. And that's, you know, that's larger than the whole global
crypto world is sitting on the blockchain. So that's a big thing. But once it's there,
once it has that underlying infrastructure, people can go forth and multiply as far as
building technology on top of that and actually making their businesses more efficient.
Yeah, I mean, I mean it's fascinating. I think the whole blockchain technology
and those applications, I think people spend a lot of time thinking about cryptocurrency,
but of course, that source of truth and the fact everyone can see the same thing
I think is going to be very important. I think, as you say, it's for us enterprise blockchain,
it's about the synchronisation of an industry. It can't be a bad thing that everyone is on the same
page with everything at all times in real time. That will help everyone in actually making
better products, making things more efficient and making things work,
you know, sort of like with 100% sort of like, certainty, You know, I think it's fascinating.
Now I'm aware that we're kind of coming towards the end of our time, but just quickly, of course,
you launched the ASX All Techs Index last year. Tell us a bit about that. And importantly, I mean,
obviously in a world that we're in at the moment where technology is paramount to a lot of things,
how do you think that will help in terms of boosting the technology sector in Australia?
I think it's a great thing and it's a reflection of all the same trends here. It's the software is
eating the world. It's the, if you sit here and say what will be larger in 20 years,
as far as an industry is concerned, technology is going to be one of them.
So if people say to me, oh why as ASX doing that, that's for NASDAQ or offshore
exchanges to be doing, I think, I think it's a fantastic thing that Australia is developing
an ecosystem in Australia for technology capital markets. And so, as we all know,
our exchange has been more mining, banks, perhaps retail focused, but actually, over the last couple
of years, the big growth sector has been tech. You know, and I think that's not, it's not
about being, you know, it's great that it's a good thing for ASX, but it's a great thing
for the economy because wouldn't it be sort of disappointing if all these smart entrepreneurs,
all this smart technology was like, well, actually to succeed, I've got to go
overseas and I've got to raise capital overseas and I don't have that here. So it's great for
jobs here. It's great for entrepreneurs here. It's great for the ecosystem here, but also
within the financial services sector, it's also great for bankers and lawyers and accountants and
all of those people who actually service that industry down here. And interesting enough,
we've also listed a number of technology companies and other companies from offshore that have come
down to our market to list because there's been like companies that have valuations down here
and you know, and that's great because it's almost like we're exporting financial services
to the world with that. So, you know, I see this as a like a must do for Australia and a must do
for ASX. And a fantastic thing for not only the technology industry, but all the other things that
sit around that, and if you look out to 2030 you want to be part of this industry.
In a way it kind of, it reduces the tyranny of distance, which of course has always been
a street, I think. I think as a final point, that's exactly the right one.
Is that like, you know, I think what the last two years have shown is that the tyranny of distance
thing was on a downtrend and it's just sort of like collapsed quite a bit. And I think a lot
of people might say, well, I can do this business anywhere in the world, and Australia is a pretty
good place to do that - a lot of smart people, a great sort of like lifestyle down here. So...
And we have the talent. And we have the talent. Exactly. Right.
So Dominic Stevens, we could talk for much longer. I'm sure. Our alloted time is up.
Thank you very much, much appreciated. And it's very exciting. Thanks Ric and thanks Macquarie.
Thank you very much. Thank you.