Stockbrokers spending ‘millions’ on ASX blockchain

“Many of our members are spending millions of dollars in order to be able to interact with the new distributed ledger technology that the ASX is implementing,” Ms Fox said.

The Australian Financial Review revealed in June the ASX had finally completed its build of the new CHESS system after pandemic-related delays and has started a rigorous testing phase.

Asked to respond to Ms Fox’s testimony, a spokesman for the ASX acknowledged the upgrade of the 25-year-old platform would entail some costs for market participants.

Customers have choice

“This will be primarily due to the manner in which they connect, the features they wish to use, or their need to integrate the new system into their downstream environments,” the spokesman said.

“Customers have choice about how they wish to interact with the new CHESS system. The choices they make will determine the costs.”

But the ASX chose not to levy brokers or other market participants to cover the cost of the upgrade and will not increase fees for any like-for-like services, the spokesman said.

Brokers who interact with the new CHESS via “messaging”, as they overwhelmingly did with the old system, may face some costs associated with the ASX’s upgrade to the new global ISO 20022 messaging protocol. But this was a change the “industry requested”, he said.

The market operator has waived connection costs for three years for brokers who choose the alternative route of interacting with CHESS’ underlying blockchain system directly.

Ms Fox’s comments about CHESS came in response to a question from the panel of MPs, which included the Coalition’s Andrew Bragg, Labor’s Jess Walsh and crossbencher Rex Patrick, about the role that corporate licensees should play in the Morrison government’s new individual registration regime for financial advisers.

Education angst

Unlike the financial planning sector, which has seen a proliferation of independent and privately owned firms since the Hayne royal commission and exit of the big banks, stockbroking firms are “large businesses and getting larger”, Ms Fox said.

Many are merging and amalgamating, she said, to achieve greater scale allowing them to access a wider range of investments and compete against the self-directed trading platforms offered by the big four banks and the new batch of booming online brokers such as Stake and Superhero.

Ms Fox also reiterated her concerns with the government’s mandatory financial adviser education reforms, which she said had not been “particularly well targeted” to her members.

She estimated some firms may lose up to 10 per cent of their employees as veteran brokers head for the exit rather than upskill. “For our members, the loss of experienced advisers is a top risk on their register,” Ms Fox said.

Under the controversial regime, all individuals licensed to provide advice must pass a national exam by January next year and complete an approved tertiary degree over the next few years.

The lobby group is pushing for a broader range of approved degrees than the soon-to-be-defunct Financial Adviser Standards and Ethics Authority previously allowed, including in broad economics and commerce disciplines rather than financial planning.

Senator Patrick said he would be open to proposing an amendment to the government’s education legislation to broaden the scope of approved degrees.

Meanwhile, the costs of professional advice have skyrocketed by 30 per cent in two years as the supply of planners and brokers has dwindled. The corporate regulator is examining more than 400 proposals to boost access to affordable advice.