Australian bourse to overhaul technology infrastructure

The Australian Securities Exchange (ASX) is wiring up a “once-in-a-generation” tech overhaul that will give it the means to offer 21st century financial services.

The ASX is replacing its Cobol-based Clearing House Electronic Subregister System (Chess) with a blockchain cum distributed ledger technology (DLT) system that will be launched in March 2021.

Along the way though, the ASX has had to shift its software engineering chops from the likes of Cobol maintenance to embrace new-age technologies such as blockchain and application containerisation through Kubernetes.

The new DLT and its attendant systems are intended to be much more than a just a clearing house for share market transactions, but there’s a way to go before the exchange finishes the climb.

“If we were climbing a mountain, we have left base camp – we are through the foothills and into the escarpments,” said David Campbell, general manager for engineering and architecture at ASX, who was speaking at Pivotal Summit 2019 in Sydney.

“In the 2020s, the ASX is embarking on a once-in-a-generation core systems modernisation,” said Campbell, adding that the DLT system will be built in partnership with VMware.

“The ASX is embarking on a once-in-a-generation core systems modernisation”

In addition, Campbell revealed that the ASX is implementing an open data analytics platform and moving to microservices-based development, along with DevOps.

“We are doing this not just for the sake of technological currency, but also to understand how best we can support our customers to innovate for their customers. Continuing this role of innovation to the financial services sector is absolutely critical to the ASX,” he said.

The ASX has 20 core systems handling transaction flows involving shares, bonds, exchange traded products, derivatives and over-the-counter operations.

“We enable our customers to manage financial and systemic and interest rate risk through our derivatives and over-the-counter business, which covers about 30% of the financial flows in the Australian economy every day,” said Campbell.

The demands of the market mean the ASX measures system latency in microseconds.

“In our clearing and settlement business, we process several million trades a day and we transact through five billion dollars of delivery versus settlement,” Campbell said. “We manage the subregister for about A$2.2tn worth of equities, representing over half of Australia’s superannuation pool,” said Campbell.

In the past, much of the ASX’s technology infrastructure was built in silos, spanning systems that were optimised for specific purposes that had created value for many decades.

But this style of system construction has limits, especially in the brave new world of containers, microservices and distributed ledgers.

“The more systems we add, the more constraints we create, particularly at a time when there’s very broad change like there is today,” said Campbell, adding that the move towards a common engineering platform will pave the way for standardisation and automation, enabling developers to focus on business logic.

ASX’s move to embrace DLT comes on the back of Australia’s growing interest in blockchain, a type of DLT.

Adrian Turner, CEO of Data61 digital research network, said blockchain could potentially reframe financial services and address industry issues, such as food provenance and quality of agricultural exports.

Blockchain could also bolster Australia’s productivity, which has declined more sharply than in other Organisation for Economic Cooperation and Development (OECD) nations.