Technology investments push ASX yearly operating expenses up 6.5 percent

The Australian Securities Exchange has reported operating expenses of AU$170.6 million on underlying profit after tax of AU$426.2 million and operating revenue of AU$746.3 million for the 2016 financial year.

The Australian Securities Exchange (ASX) has announced with its technology transformation underway, the company was able to achieve underlying profit after tax of AU$426.2 million, a 5.7 percent increase year-on-year for the financial year ending 30 June 2016.

Operating revenue for the full year came in at AU$746.3 million, up 6.5 percent when compared to results reported for the previous financial year.

The ASX also reported that due to its continued investment in people and technology, such as its new futures trading platform, risk management systems, and an upgrade of post-trade clearing infrastructure, operating expenses grew 6.5 percent to AU$170.6 million.

Meanwhile, capital expenditure hit AU$50.2 million, with expectations total capital expenditure for FY17 will again reach approximately AU$50 million, inclusive of the distributed ledger technology development.

"ASX continued to invest in the infrastructure critical to Australia's financial markets throughout the period. This included successfully introducing T+2 settlement, significant progress on the delivery of a new futures trading platform, and the assessment of distributed ledger technology or 'blockchain' as a potential post-trade solution for the equity market," ASX chairman Rick Holliday-Smith said.

"These initiatives aim to improve market efficiency and reduce risk and complexity for investors, intermediaries, and other market stakeholders."

At the start of the year, the ASX enlisted US-based firm Digital Asset to help it develop solutions for the Australian equity market using blockchain technology, the underlying system that facilitates transactions such as bitcoin trading.

The announcement was part of the ASX's plans, which it revealed last February, to replace or upgrade all of its main trading and post-trade platforms.

The ASX then launched a showcase space at its Sydney headquarters to gather feedback from the market on blockchain technology, which it plans to use to develop its new post-trade platform.

During the start of the year, the ASX also announced partnership with Nasdaq that will see Nasdaq replace ASX's existing equity options clearing technology platforms.

Under the deal, ASX said the technology will be developed on Nasdaq's Genium INET clearing platform, which is already being used by the organisation for futures clearing.

More recently, ASX group executive Tim Thurman revealed the company has partnered with Tibco for its Enterprise Service Bus platform that will be used to help the ASX eventually develop a data strategy.

Thurman believes in the long run building out a centralised data lake over the upcoming months -- something in which he says is a key strategic agenda for the ASX -- will enable the organisation to build a data strategy, and eventually analyse the existing data so that it can be more proactive and predictive in what its clients are seeing.

"We're getting much better at it purely because the data is much more accessible and having the tools to sample the data," he said.

Off the back of this, Thurman said there are plans to move from having four separate clearing systems to just one.

ASX is currently two years into completing its technology transformation program.

Looking ahead, ASX is aiming to see its futures trading platform go-live by February 2017, and hopes to see more progress made to its risk management and post-trade development during FY17.

The company said it also plans to continue to work with intermediaries, issuers, investors, as well as government and regulators, to understand whether blockchain technology could be used to replace the CHESS clearing and settlement system for cash equities.

"ASX is a highly integrated business with a trusted, independent brand. These strengths have allowed us to provide high quality services and solutions on which our customers can rely," Recently appointed ASX managing director and CEO Dominic Stevens said.

"Our focus on customer service and continued investment in technology will further improve this capacity. This gives me confidence as a CEO of only two weeks that there is a strong business in place and exciting opportunities ahead for ASX."