The ASX of the future will not purely be a venue to trade equities and derivatives but will allow thousands of participants in the market to do a whole manner of things. The ASX sees itself not only as the nation's securities exchange but as critical infrastructure - a trusted network and provider of secure connectivity.

Its governance - the ASX is closely regulated by the Reserve Bank, Australian Securities and Investments Commission, Australian Competition and Consumer Commission and Council of Financial Regulators - will need to focus on how it determines access to the blockchain system, and the sorts of applications, like the new CHESS, it decides to run on it.

So how are developers planning on using the ASX’s distributed ledger technology (DLT) platform? To bring registry management in-house; to automate proxy voting, so AGM votes can be cast with the click of a button; for the real-time management of capital raisings; to facilitate superannuation switching by by-passing pooled unit structures; to mutualise KYC; to re-engineer procurement processes; and to digitise the home-buying experience, just to name a few.

Many of these extend beyond CHESS (equity information ownership) data alone. The real benefit of taking one of ASX's "nodes" will be the ability to connect to a wide range of players, to create groups that can use the blockchain's 'smart contracts' to enhance efficiency by automating a variety of business processes.

Take Automic Group. Since it was founded four years ago, it's quietly grown to the fourth-largest registry in the country after Computershare, Link and BoardRoom. By thinking outside the box, it expects to attract 20 per cent of listed companies by next year, and wants to attract more companies in the top 200. Even though ASX is creating a single source of truth with its DLT, data registries will still have a role to help their customers - custodians, fund managers and corporates - to make sense of that data.

Automic managing director Paul Williams says distributed ledger technology "will open up opportunities to create efficiencies through utilisation of data and automation. We will be able to automate functions for company secretaries.”


This includes providing real-time notifications on share register movements, such as director sell downs or activist attacks. That's a vast improvement to the current notification processes that can take several days. Williams also sees a future where taking a node on the ASX blockchain and white-labelling a registry platform like Automic's will allow a company to turn shareholders into customers.

Another area set to be transformed by the ASX's new technology, which is being built with New York-based Digital Asset, is the administration of superannuation.

Growsuper has pivoted into administration, motivated by frustrations with incumbent platforms, Link and Mercer. It is running proofs of concept and pilots with 15 funds, and plans on taking an ASX node as soon as they become available to help it offer services that reduce operational complexity around super.

“The high cost of admin services is driven by all the multiple parties, from trustees being distinct from funds, administrators, insurers, custodians, regulators. Even within one fund, there is a micro-ecosystem with a web of complexity and there's a massive problem given very low confidence in the source of truth," says Growsuper CEO Josh Wilson. “There will be huge opportunities, massive cost savings that will be of huge benefit to members.”

Wilson expects ASX to trigger the redesign of many super products and innovations including dynamic rebalancing of portfolios with improvements in the quality of advice, customer relationship management and analytics. In the future, by attaching a CHESS holder identification number to a super account, an investment structure could be created that bypasses the pooled, unit trust so particular equities could be purchased directly on behalf of a member. If that person wanted to switch funds with a similar asset allocation, the actual equities could shift too, rather than the current process of selling out of them and then buying them back. This brave new world could reduce broking costs and de-risking members from market movements.

Custody is another archaic area of the financial markets set to go through a massive ASX-induced transformation.

David Braga, head of security services at BNP Paribas, points to proxy voting. Currently, it's notoriously difficult to get a stable understanding between custodians, issuers and fund managers about who is entitled to vote a securities holding, given time lags in updating and then reconciling various records of ownership when securities are traded.


But with blockchain, "we will be able to see the record of the same data at the same time, which will help for risk management," Braga says. He envisions new artificial intelligence engines using big data and smart contracts to automatically cast votes at annual meetings by reading company disclosures and comparing them to policies.

Lukas Bower, managing director of Industrie &Co, the consultancy building the graphic user interface for CHESS, reckons mutualised ‘know your client’ (KYC) regimes are another attractive use case of the ASX's DLT that could radically reduce costs for banks. Banks currently conduct KYC processes themselves, and re-do the work every time a customer switches. But the blockchain will allow one bank to syndicate their proof which could be relied upon across a group.

“The savings could be profound, each bank is currently building their own solution at great expense. We have innovators out there across the financial sector, someone needs to do it.”

Prem Naraindas, global blockchain director at DXC Technology, agrees the big benefits of the ASX blockchain will come outside equities, as multiple actors in various industries work out new ways of working with each other.

DXC is working on two projects with Bloxian Technology to put the ASX blockchain to use as soon as possible.

One is looking to streamline the procurement of services. Similarly to the mutualised idea, it currently can take several months for a new contractor to be brought on board by a bank given the extensive checks that take place, and each bank does the work itself even if the same party works for other banks with similar processes. A system to co-ordinate vetting, while also allowing for idiosyncrasies, will be ready mid next year, a year before the new CHESS is set to go live.

DXC and Bloxian have also build a digital, end-to-end home buying application, the first working demo built on the Digital Asset Modelling Language (DAML) anywhere in the world.

On the ASX's blockchain it assesses borrower capability to repay a loan after analysing bank account information, and takes prospective buyers through virtual walk through of properties using augmented reality. Borrowers can apply for loans online and the process has also digitised bidding and settlement documentation.


All these use cases provide a warning that incumbents not willing to modernise their own businesses and follow rapid advancements underway will be left behind.

While some ASX critics are worried ASX's infrastructure will become a monopoly, the DAML language has been open sourced, so can be used with other enterprise blockchains such as Hyperledger, or in cloud platforms run by Microsoft or Amazon. ASX is competing in a new world of blockchain infrastructure against names like Corda, R3 and Quorum.

The ASX of the future could look more like an Apple, in terms of how it earns revenue, than a traditional exchange. Apple allows many developers onto its platform but vets them, and clips some of their revenue. Like Apple, ASX could sell both access to its infrastructure (the node being like a smartphone) and share in the applications allowed to run on it.

Platform regulation is in the spotlight. US presidential hopeful Elizabeth Warren doesn't want big platforms like Apple or Amazon providing any applications or selling any goods on their services at all. Australia's regulators will be monitoring how ASX governs access to its network and how it decides what services it provides.

The technology world is watching as ASX shifts Australia's financial markets onto the new infrastructure. UBS is among several investment banks that have started to work on new ASX integrations. Says BNP Paribas’ Braga: “Global participants are excited about what is possible.”