ASX posts AU$492m profit as it prepares for a technology-driven future

The 12-month period saw the exchange deliver milestones under its CHESS replacement project, work on a new secondary data centre, a data analytics platform, and a new website.
Written by Asha Barbaschow, Contributor

The Australian Securities Exchange (ASX) is currently in the process of overhauling its infrastructure to ensure the business is set for the technology challenges in the years ahead.

Announcing its financial results for 2019, the exchange said that key to positioning ASX for the next decade is putting in place a "contemporary, flexible, and resilient operating platform to enable the ASX to offer more value-added products, services, and infrastructure".

According to managing director and chief executive Dominic Stevens, the success of the ASX is underpinned by the technology that powers it.

"We continue to take a long-term approach to ensure ASX remains at the forefront of financial markets innovation and a leader among its peers. Our technology-driven, customer-focused strategy is enabling ASX to build an exchange for the future," Stevens told shareholders on Thursday.

As a result, for the 2019 financial year, the ASX spent AU$19.3 million more in operating costs than it did last year, with a total of AU$214.8 million outlaid by the exchange.

Overall, the ASX posted a 10.5% increase in statutory net profit after tax to AU$492 million for the 2019 financial year.

Operating revenue was AU$863.8 million, up 5% or AU$41.1 million for the 12-month period. Earnings before interest, taxation, depreciation, and amortisation increased 3.5% to AU$649 million.

Operating revenue was mostly comprised of derivatives and OTC markets, accounting for AU$309 million; trading services for AU$230 million; listings and issuer services adding AU$220.2 million; and equity post-trade services contributing AU$108.4 million to the total.

Equipment costs increased 10.2% to AU$30.7 million, which the ASX said was due to additional licensing and support costs associated with digital initiatives such as the redesign of the ASX website and the development of its data analytics platform DataSphere.

DataSphere was sent live earlier this year, with Stevens saying DataSphere has not only enhanced ASX's data analytical capabilities, but also enabled its customers to access that capability without having to develop their own.

Using ASX and third party data, the exchange said DataSphere gives it and its customers the ability to "unlock value through insights and analysis in a secure and governed ecosystem".

"We have a proud history as an early and successful adopter of new technology," Stevens added. "Today, we continue to embrace innovative solutions to make life easier for customers, help companies grow, create value for shareholders, and support the Australian economy."

The exchange invested AU$75 million in capital expenditure during the year, compared to AU$54 million in the previous year. ASX said the increase is reflective of its ongoing investment in upgrading technology such as the upgrading of its secondary data centre and ASX Net communications network, which connects its data centres to customers in Australia and around the world, and the Clearing House Electronic Subregister System (CHESS) platform replacement project.

The ASX is building a new post-trade solution using blockchain technology. The solution replaces the legacy CHESS platform, which has been running for around 25 years.

Read more: Here's what to expect from ASX's blockchain-based CHESS replacement

Further touching on the CHESS replacement project, the exchange on Thursday said it met all of its FY19 milestones and reaffirmed it was on track for go-live in March-April 2021.

As detailed by ASX general manager of engineering and architecture David Campbell last month, the exchange in FY19 launched its CHESS customer development environment.

There's about AU$2 trillion worth of equities registered in CHESS. Per day, around AU$5 billion is processed through CHESS, and 300-500 transactions and up to 1,500 messages are processed per second.

The ASX is about 30-40% through its major functional build, planning for industry-wide testing of the new system in 2020.

See also: ASX's new blockchain-based CHESS system: A marathon not a sprint

During FY19, staff costs increased 11.5% to AU$127.7 million. This reflects the hiring of 102 additional full-time equivalent employees throughout the year. Occupancy costs increased 9.5% to AU$17.9 million, primarily due to the increase in the group's international data centre footprint and additional floor space requirements.

The ASX also commenced technical migration to its new secondary data centre during the financial year, ahead of commissioning in October 2019. Stevens said the new data centre will act as a "state-of-the-art" backup to its primary site.

The exchange also expects to have all ASX services and third parties migrated to upgraded ASX Net communications network by September 2019.

Built by ASX solely for the financial markets community, ASX Net is touted by the exchange as providing businesses with network connectivity into the Australian financial markets community.

"It links to more than just ASX's trading, clearing, settlement, and market data services. It can provide direct connection to alternative liquidity venues, brokerage firms, data vendors, and application service providers, plus the Asian, European, and North American markets via ASX Net Global," the exchange explains.

At the closure of its financial year, there were 2,269 listed entities on the exchange, including 111 new listed entities or initial public offerings. Of that 111, 16 are technology firms and 23 are foreign entities.

The total new and secondary capital raised on the ASX during FY19 was AU$86 billion and the daily average cash on-market value was AU$4.6 billion.

Celebrating its 20th year as a listed entity on its own exchange, ASX told shareholders it boasted a AU$2 trillion domestic market capitalisation.

After experiencing outages in the past, the ASX reported in FY19 that it had 100% uptime availability for its five main trading and post-trade systems.

During the year, the ASX also opened an office in New Zealand.


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