U.S. markets closed
  • S&P 500

    3,829.34
    -96.09 (-2.45%)
     
  • Dow 30

    31,402.01
    -559.85 (-1.75%)
     
  • Nasdaq

    13,119.43
    -478.54 (-3.52%)
     
  • Russell 2000

    2,203.30
    -81.08 (-3.55%)
     
  • Crude Oil

    63.44
    +0.22 (+0.35%)
     
  • Gold

    1,770.70
    -27.20 (-1.51%)
     
  • Silver

    27.48
    -0.45 (-1.62%)
     
  • EUR/USD

    1.2174
    +0.0006 (+0.05%)
     
  • 10-Yr Bond

    1.5180
    +0.1290 (+9.29%)
     
  • GBP/USD

    1.4011
    -0.0130 (-0.92%)
     
  • USD/JPY

    106.2210
    +0.3390 (+0.32%)
     
  • BTC-USD

    49,056.02
    -83.68 (-0.17%)
     
  • CMC Crypto 200

    981.78
    -12.88 (-1.29%)
     
  • FTSE 100

    6,651.96
    -7.01 (-0.11%)
     
  • Nikkei 225

    30,168.27
    +496.57 (+1.67%)
     

Edited Transcript of ASX.AX earnings conference call or presentation 10-Feb-21 11:30pm GMT

·58 min read

Half Year 2021 ASX Ltd Earnings Presentation Sydney Feb 11, 2021 (Thomson StreetEvents) -- Edited Transcript of ASX Ltd earnings conference call or presentation Wednesday, February 10, 2021 at 11:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Dominic John Stevens ASX Limited - MD, CEO & Executive Director * Gillian Larkins ASX Limited - CFO ================================================================================ Conference Call Participants ================================================================================ * Andrei Stadnik Morgan Stanley, Research Division - VP * Andrew Buncombe Macquarie Research - Insurance and Diversified Financials Analyst * Ashley Dalziell Goldman Sachs Group, Inc., Research Division - Equity Analyst * Edmund Anthony Biddulph Henning CLSA Limited, Research Division - Research Analyst * Kieren Chidgey Jarden Limited, Research Division - Analyst * Matthew Dunger BofA Securities, Research Division - Research Analyst * Nigel Pittaway Citigroup Inc., Research Division - MD & Head of Pan-Asia Diversified Financials and Insurance * Siddharth Parameswaran JPMorgan Chase & Co, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [1] -------------------------------------------------------------------------------- Good morning, and welcome to ASX's FY '21 half year results. Thank you for taking the time to join us in this virtual presentation. My name is Dominic Stevens, Managing Director and CEO of ASX. Joining me is Gillian Larkins, ASX's Chief Financial Officer. To begin, I'd like to acknowledge that this briefing is being held on the traditional lands of the Gadigal people, and I pay my respects to elders past and present. This morning, I'll begin with an overview of the financial results and take you through some of the initiatives being worked on in the business. I'll then talk to progress on strategy over the period. Gillian is then going to take you through the detail of the results. I'll then conclude with some outlook comments and summarize before opening up the Q&A, first from the analysts and then from the media. So let's begin. It's been an eventful first 6 months of FY '21 for the world, Australia, business in general and for ASX. We've seen global political upheaval, dramatic economic changes brought on by the COVID pandemic, a domestic recession for the first time in close to 30 years, and interest rates fall to almost 0 or below in Australia and around the world. We've also seen ongoing volatility in volume in the equity market due to COVID and, conversely, stability in the interest rate market due to yield curve control. And post the reporting period, we witnessed the short squeeze of certain U.S. equities driven by retail day traders, which has prompted significant global debate. Notwithstanding this backdrop, our results today reflect a solid performance in mixed conditions. This highlights the value of ASX's diversified business and the commitment and resilience of our people during the pandemic. ASX also continued to make operational and strategic progress over the last 6 months. This includes advancing many product and service initiatives, some of which I'll talk about today; achieving significant progress to increase operational resilience across ASX despite the regrettable ASX Trade outage last November; continuing to contemporize our technology, which sets ASX up for the long term; progressively returning to the office while retaining the benefits of greater flexibility. As a result, ASX remains well positioned to deliver resilient earnings and dividends, while investing in future growth and innovation. Let me now move to the financials, which show a solid operating performance. This reflects the diversified nature of our business across markets that have responded differently to the events of the last 12 months. Operating revenue increased by $15.6 million over the previous corresponding period to $470.5 million. This was an increase of 3.4% and reflected growth in our Listings business and our equity trading, clearing and settlement businesses. It was offset somewhat by the revenue reduction in our derivatives businesses, driven by expected weakness in short-term interest rate futures volumes due to yield curve control. Total expenses increased by $11.6 million over pcp to $151.4 million, and this was a rise of 8.2%, a touch higher than the run rate of our full year forecast, with the difference mainly due to variable market-related activity costs and initiatives. I'll leave Gillian to elaborate. This left EBIT pleasingly up $4 million in a mixed half to $319.1 million, which was a rise of 1.3%. With a collapse of short-term interest rates to effectively 0, net interest income was significantly lower, falling $17.4 million on pcp to $26.7 million, and this was a drop of 39.5%. The effect of the lowest interest income results in our NPAT being lower by $8.6 million on pcp at $241.8 million, a drop of 3.4%. Consistent with this, our EPS for the first half is also 3.4% lower at $1.249 per share. Our interim dividend maintains our policy of distributing 90% of underlying earnings and is $1.124 per share, a reduction of 3.4%. I'll now address some of the market drivers of our result. The pandemic has affected our markets in different ways. The equity capital markets had a dynamic 2020 with IPOs stalling after pandemic started, alongside a significant increase in secondary raisings as companies impacted sought to recapitalize. Late in 2020, the IPO market came back strongly with one of the busiest 3 months ever seen at ASX. As evident from the charts, $52 billion of capital raise was an exceptional performance during the pandemic. Pipeline's remain strong, and it will be interesting to see what the second half of the financial year brings. Cash market trading, on the top right, had another strong 6 months, with $762 billion in total on-market value for the half. Although this is not as strong as the second half of FY '20, which was driven by the massive volatility of March last year, value was up more than 19% on pcp. This increased turnover flowed through to clearing, settlement and issuer services revenue. As mentioned earlier, yield curve control resulted in lower volumes in the short end of our interest rate derivatives market. At the longer end of the yield curve, government bond issuance contributed a significant increase in 10-year futures volumes. We also saw continuing growth in our electricity derivatives complex. And finally, government bond issuance also drive activity levels in Austraclear, with higher holdings, higher transactions and higher registrations. So today's result showcases the benefit of ASX's diversified business. It also reflects how we're expanding and enhancing the customer value proposition through strategic initiatives. We're doing this in our Listings and Issuer Services business by growing our listings franchise, with benefits for both issuers and investors. The most notable initiative here is the work we've done to increase the breadth and depth of the listed technology sector and to grow the number of international listed companies on ASX. During the half, over 20% of the IPOs were technology and/or international listings. Our listed technology sector includes 30 companies that have a $1 billion market cap or more. Five years ago, there are only 5 tech companies of this size. The growth of listed tech in Australia is not only good for ASX, but good for the economy and good for the growing technology ecosystem in Australia. A number of the international listings during the half came out of New Zealand, which underscores the importance of the dedicated New Zealand office we opened at the end of 2019. During the half, we've also seen the introduction of innovative investment products in our market. Firstly, a hybrid fund structure where the underlying trust can issue both open- and closed-ended units, which lowers the cost for the issuer; and secondly, dual unit structure where investors have the option of transferring from the register of an unlisted to a listed equivalent or vice versa. These structures are a great example of how ASX is working with issuers to help them reduce costs while at the same time working for investors by increasing the flexibility of how they can trade and hold assets. It was also a busy half of the Derivatives and OTC Markets business. Despite lower overall volumes in the half, the team has worked hard on product launches and enhancements. The 5-year treasury bond future was launched at the end of November 2020. While it's still early days, initial interest has been strong and market signs are encouraging, as shown in the chart on the right-hand side there. It's true that COVID market conditions with yield curve control provided the impetus for the launching of this product. However, I believe that if open interest continues to grow, liquidity in the 5-year will be sustained beyond the current environment of yield curve control. I'm confident that the 5-year has the potential to become one of our flagship interest rate derivative products. In terms of our existing exchange-traded derivatives franchise, enhancing value for customers is central to this business. Within the half, we delivered significant savings to end users by narrowing the 3-year and 10-year tick sizes during the quarterly bond futures roll. Austraclear had a busy half due to increased bond issuance and new functionality which was built, which gives customers better automation and increased operational efficiency. And while it remains relatively small in ASX's overall product suite, the electricity futures business continues to grow strongly. We're supporting the development of this market through engagement with the energy industry, market makers and government bodies. During the half, we also announced enhancements to our offering to support the evolution of the electricity spot market. And now a quick word about COVID and the return to office. It's clear that the pandemic is changing the way businesses think about work in Australia and around the world. We live in an increasingly virtualized world. Many firms, including ASX, are working at how to optimize the value of the collaboration and the interaction of the office with the benefits of flexible work arrangements. At present, all staff are returning to the office for at least part of the week and having conversations about optimal arrangements for the future. ASX has also invested in the well-being of its staff during the pandemic. This has enabled the team to remain committed and resilient over the course of the past year, with staff surveys showing high confidence in the decisions ASX has made in response to COVID. So I'd now like to move on from business specifics and talk a little bit about our strategy. To begin, it's important to address the equity market outage last November. Firstly, all outages are hugely disruptive, and I apologize to our customers and to investors and acknowledge that issues -- the issues they had to deal with. The incident fell short of our own high standards and the standards the market expects. The November outage was particularly disappointing because, while technology issues cannot be completely eliminated, ASX has done much in recent times to reduce the risk of their occurrence. It's important that our customers, investors and the broader market understand what we're doing to bolster reliability and resilience. Fortunately, outage are infrequent. Given this, to get a proper perspective on performance, we need to look at multiyear trends averaged across time. The chart you can see on Slide 11 covers our 5 main trading, clearing and settlement systems and shows the rolling average number of outages across a 2-year period from February 2011 to today, so 10 years. If we look back over time, we can see that something quite fundamental has happened since early 2018. Outages have become less frequent to the point that ASX had its longest no outage period in its history pre the November issue. So if we look what has driven this change, it could be traced back to the middle of 2016 when we began working on our Building Stronger Foundations program. This focused on risk management, technology governance, enterprise architecture and incident management. It involves a significant body of work and an increase in the resources and capital expenditure. This has lowered risk and increased resilience. And as you can see from the chart on Slide 12, over the past 4 years, which we've just been talking about, customer-facing technology and operational incidents at ASX, so broader than just outages, has fallen by around 78%. This is a dramatic reduction in incidence and reflects the success of the program. Importantly, the reduction in incidents have been achieved during a significant technology change program at ASX, and also when the scale of scope -- and scope of what we're doing is expanding our technology footprint. In the long-run, upgrading and introducing new technologies is unquestionably a positive for reducing long-term risk, delivering value to the market and strengthening the ASX franchise. However, in the short term, all technology changes have a degree of risk after a significant deployment. Notwithstanding this, we're only as good as our recent past performance. And just like our actions from 2016 that lowered instances and outages, as you've seen on the chart, I'm sure that learnings from the events of late last year will enable us to lower risk even further. In addition to these measures, we can further reduce risk and increase our strategic optionality via technology change. At the FY '20 full year results in August last year, I showed a chart that highlighted the contemporization journey of our technology. This demonstrated the significant change program within ASX. We believe it is of great value to the market to continue updating our technology to enable our customers' businesses to become more and more digitized. Australia has a unique opportunity to lead the world in the efficiency of financial services with data analytics, digitized corporate actions, distributed ledger, cloud and other contemporary technology at all levels. With the rollout of CHESS replacement over the coming 2 years, ASX is well placed to have a highly contemporary end-to-end cash equity platform, with the average age of our equities technology stack from data center all the way through to the website, falling by more than 50%. This is a once in 10- to 20-year change and will position ASX to lead the drive for customer and exchange efficiencies for the next decade. The chart also shows that even though public attention is mainly focused on CHESS replacement, it's actually one part of a much broader technology transformation program. This extends from equity market upgrades, as we've seen, to ASX infrastructure like the new secondary data center and new ASX Net, and to upgrades to our derivatives technology, such as the rollout of the NTP futures trading system in 2017 that replaced SYCOM. In the half just completed, ASX also finalized the replan and, importantly, the consequential resizing of the CHESS replacement project as well as addressing the need for additional time to complete readiness activities, the replan and resizing address 4 key issues: greater scale to cover the increase in peak daily volumes, which have grown 350% since we began the program; additional scope with functionality related to the digitization of certain corporate actions; expanded testing and integration to reflect the industry's desire for more comprehensive testing, particularly on transition data; and more time due to the significant effects of COVID on ASX, our system vendors and participants. Currently, the system as originally specified is mostly functionally built. The work that remains is related to nonfunctional features, and to changes to enable greater scale and new functionality that I just talked about as part of the replan. This will be complete in the middle of the year when ASX testing begins before vendor and participant testing commences towards the end of the year. Importantly, ASX spent significant time in the latter half of 2020 listening to stakeholders. And we think we've reflected that in the plan, which has received broad support. As I've said many times, we're committed to contemporizing ASX's technology stack. This is because our technology platform enables ASX to deliver resilient earnings from its core businesses by serving our customers and meeting the standards our industry and regulators expect of us. There are many industry market and technology forces that ASX can leverage to grow its value over the next decade. Across all industries, but especially in financial services, we see an explosion in data, the digitization of processes, a focus on operational efficiencies and risk management excellence as well as the growth in the financial services economy, driven by our compulsory superannuation system. It is therefore key that we maintain the quality of our existing business and unlock future revenue streams via an innovative and contemporary technology. Technology is becoming less about how we interact one-to-one with our customers and more about how we collaborate with them, and even more importantly, how we enable them to collaborate with each other. Interestingly, today, we consider our connectivity activities in Trading Services as one of our core businesses. But a decade ago, it was a growth adjacency. By taking an innovative and collaborative industry-wide approach, we built a technology business to create a more efficient ecosystem for the industry. We see similarities with DLT and with DataSphere, both technology initiatives that we hope will create a more efficient industry-wide ecosystem. In broad terms, our technology contemporization program is an investment in our core businesses while providing for other opportunities into the future. So I'll now finish on this slide with a quick update on our growth adjacencies. Sympli made positive progress over the half. The Federal Government, the ACCC and all the states and territories now support interoperability, which is a great step. With legislation expected during this calendar year, Sympli is also bedded down connection to the major banks with 3 planned to be connected by June and the final one following soon after. DataSphere is operational and is working with customers on some early functionality around electricity data, Austraclear corporate actions and bond liquidity functionality. And finally, DLT solutions. As we've said previously, with respect to DLT, our attention is very much focused on the CHESS replacement program. However, there's a number of opportunities being worked on with partners. And to support this, a cloud-based platform for customers to enable easy use of the DAML modeling language will be launched in the coming months. So on that note, time for me to hand over to Gill to step us through the numbers. So I'll return to wrap up things after that. So over to you, Gill. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [2] -------------------------------------------------------------------------------- Thank you, Dom, and good morning. ASX's result for the first half of 2021 reflects the impact of the low yield environment, introduced through the course of the second half of 2020. Income derived from our futures and derivatives business and from collateral balances certainly came in lower than the previous 18 months. However, it was pleasing to see the continuation of the elevated cash equities trading from the previous half and the increased capital markets activity. This activity contributed to a better-than-expected revenue outcome. However, with the inclusion of heightened expenses due to additional employees, licensing of our technology applications and an increase in the costs of supporting the elevated market trading, overall profit for the business decreased against the first half '20. Turning to the financials and starting with the top line. Revenue for the half is up 3.4% from first half '20, reflecting solid performance by our Listings and Issuer Services, cash market trading and Equity Post-Trade businesses. However, you will note this number is lower than second half '20 due to the heightened trading the markets experienced in the last half of the previous financial year and the strong performance of our Austraclear offering. First half '21 saw total expenses for the group increased by 8.2%, with depreciation and amortization remaining at a similar level to the last 2 halves. Moving through the table. The interest income line shows a significant decline from the previous half by 39.5%. This fall was through the decreased earnings rates and the full year impact of the December 2019 reduction in charges to futures clients. The lower revenue from this income stream led to a decrease in both underlying and statutory profit after taxes by 3.4%. This translated into the same decrease in EPS, with the Board declaring a dividend of $1.124 per share for the half. Now to the revenue results of our key business lines. ASX has a robust business model across multiple asset classes. This not only positions us as an integral component of Australia's financial market infrastructure, but also buffers us from negative economic impacts to any one of our business lines. This half saw that impact in our Derivatives and OTC Markets business, with the lower volatility in interest rates leading to a 7.7% decline in revenue for the half. This decline has been evident in our monthly market reporting since April 2020. However, it has been partly offset by the strength of the registry and holding services in our Austraclear business. Pleasingly, this half experienced a strong increase in IPO activity and capital raisings. And on the top line, our Listings and Issuer Services business increased revenue by 11.4% on the first half 2020. The strong trading volumes that remained elevated from the end of last financial year all assisted our equity trading offerings across the sub-business areas of issuer services, cash market trading and Equity Post-Trade Services, which came in 16.1% more than first half '20. This activity helped to defray the lower revenue growth in the derivatives and technical services businesses, allowing for a 3.4% increase in revenue overall. Our Listings and Issuer Services revenue is 11.4% higher than last year. The increase is through issuer services, which saw strong growth of 43.3% for the half. The number of new listings increased by 54.5% to 85. However, the total number of listings dropped by 2% on first half '20, which contributed to our annual listing fee revenue being down 5.5% through the lower number of billed companies and a change in the mix of entities within the fee tiering. Initial capital raised increased by 95.8% from first half '20, remaining in line with second half '20, with secondary capital increasing by 3.7% on the first half '20, albeit coming off last half's all-time high. The requirement to amortize capital raisings over 5 years and secondary capital raisings over 3 years results in the listings activity being less noticeable at the revenue line. On the following slide, you can see the amortized first half '20 contributions in the dark blue box to the right of both charts. Initial listing fees were slightly down on the previous half due to the roll-off of historical fees from 2015 and 33 of the 85 IPOs occurring in December. Conversely, secondary listing fee revenue has increased by 15.8% on pcp. Moving now to the Derivatives and OTC Markets business. Our Derivatives and OTC Markets business has seen a notable decline in futures volumes since the end of March 2020 as we entered a period for the medium-term of low interest rates. Futures volumes are down 15.6% from the first half '20 due to anticipated lower activity in the short-end interest rate market. This was partially offset by a higher average fee due to a change in product and customer mix. The value cleared through the OTC clearing service gradually came down in the second half of 2020, a trend we have seen continue into the first half of 2021, declining by 46.5% on first half '20. Equity options revenue has decreased by 18.5% from first half '20. Equity options volumes continue to decline, with single stock options volume down 14.2% on the same period last year, and index options down 39.3%. Austraclear saw a higher registry and transaction activity, with revenue coming in 13.1% more than last year and in line with second half '20. This was firmly supported by the increase in issuance of Treasury bonds and semi-government securities, with the overall average collateral balance up 19% to $27.9 billion. Of note, this has subsequently declined to $13.4 billion as at 31st of December 2020 due to excess liquidity in the market. The strong result for the Trading Services business was underpinned by the market volatility with cash market trading revenue contributing the majority of the 4.2% growth on first half '20. Even though lower than the highs of second half '20, cash market trading revenue was up 12.8% on pcp, which offset the lower average on-market fee due to smaller contributions from the Auctions and Centre Point products. Information services saw a strong half, contributing a 5.2% revenue increase from first half '20. This was assisted by a rise in market data revenue resulting from the higher trading activity experienced by retail brokers. And technical services saw a decrease this half, with revenue coming in at 2.7% less. This was mainly due to lower ASX 24 market access revenue, with a decrease in liquidity cross-connect sessions by 13.2% and an average decrease in ASX 24 gateways by 22.2%. This is primarily a consequence of the changes to the bond roll tick size introduced in the September bond roll. This was negated by an increase in the number of cabinet sales in the ALC by 6.5%. Finally, moving onto our fourth business: Equity Post-Trade Services. Cash market clearing revenue was up 14% to $34.2 million, reflecting an increase of 19.3% in on-market value cleared. Revenue from cash market settlement increased by 18.2% to $33.9 million, due most notably to growth in settlement messages and transfers and conversions. This strong first half '21 activity resulted in high customer rebates totaling $7.5 million versus $1.7 million in first half '20. Turning now to total expenses. Total expenses for first half '21 were 8.2% higher than first half '20. The expense uplift was mainly through the increase in employees over the last year to support both project and license-to-operate initiatives, with the staff expense line being up 4.8%. Expenses also grew due to costs associated with ASX's technology upgrade, including cybersecurity and our digital initiatives, with equipment costs coming in at 30.8% more. With the heightened market activity continuing into first half '21, the expenses attached to the increased transaction volumes were higher, coming in on the variable cost line 46.8% more than first half '20. However, the revenue attached to this activity has more than absorbed the expense. The higher transaction activity over the last 6 months meant that the ASIC supervision levy increased by just under $1 million from first half '20 and was at a similar level to second half '20. With the depreciation and amortization line remaining fairly constant over the last 2 halves, this has led to an overall increase in total expenses of 8.2% for first half '21. Since 2017, ASX's expense composition has altered to reflect our efforts to strengthen our technology, risk and governance foundations to build an exchange for the future. This slide reflects the full year growth composition for the last 4 years. Growth was highest in FY '19 and FY '20 through our Building Stronger Foundations program, which increased the number of employees in key functions. This you can see in the dark blue components in the chart. Equipment costs, in the light blue, also increased through the upgrade of operating and service capabilities at ASX, increasing software licenses and costs associated with cybersecurity. The other notable increases have been the growth in variable costs and the ASIC levy, moving in line with the growth in activity and revenue over the last 2 years, in particular, which you can see in the green boxes. We have combined the rest of the expenses in gray on the slide. The reason for the negative amount in the FY '20 column is due to the introduction of AASB 16, where a component of the occupancy expense went to the interest line and there was also a reduction in the depreciation charge for the year. For FY '21, we are now expecting higher variable costs for a longer period than we anticipated at last year's results. This number will take shape over the next 6 months. However, we believe the expense guidance for the end of the year is more likely to be in the range of 8% to 9%. Of course, with heightened activity comes further revenue, so this would create a positive NPAT outcome for the company. Net interest income decreased 39.5% to $26.7 million for the half. The near-term expectation is that rates will remain low. It is clear from these results that portfolio returns have declined as maturing investments have been replaced with lower-yielding investments. Of note, because of decreased earnings rates, our group net interest income declined by 97.1%. Half-on-half, you can see the market impact of the decrease in investment spread over the year. There is no change to the lease financing cost of $1.7 million. However, this contributed to a group net interest income loss for the half. The average earnings spread on participant balances has moved from 35 bps to 15 bps in the half, which, when combined with the reduction of future charges to clients from 65 to 45 bps, contributes to a decrease in overall net interest on collateral balances of 25.8%, although the increase in average collateral balances to $12.7 billion has negated some of this impact. ASX's balance sheet is strong and positioned conservatively with very little difference in the underlying components between the 2 halves. We currently have an S&P long-term rating of AA-, hold a nominal amount of debt for working capital reasons, and as you can see in the table, there's been an increase in the value of our total investments by less than a combined $1 million for this half. Our investment in capital expenditure this half was $54.5 million. This is inclusive of our CHESS replacement, ASX Trade and other key projects. ASX's program of work continues into this half, with 15 projects currently underway. The largest project is CHESS replacement and through the replanning exercise carried out at the end of last year, our technology work program was reprioritized and extended to fit the demand for increased volumes, functionality and testing, as Dom discussed earlier. This had a market impact on the costings of the program, and extended the capital expenditure associated with the CHESS replacement project over a further 2 years from the original go-live date of April '21. Our guidance to market on our CapEx spend for FY '21 is now $110 million to $115 million. This is increased to specifically incorporate the costs associated with the greater volume capacity and increased functionality for CHESS replacement, and also the investment to progress our other projects. Further guidance for the remainder of the CHESS replacement program, which will include testing, accreditation and customer readiness expenditure, will be given at the full year results. ASX has benefited from elevated trading activity and strong capital markets activity through the last 6 months. However, this was not enough to combat the lower investment spread income and high single expense growth, which led to negative earnings growth for this half. Underlying profit after tax decreased by 3.4%, also leading to an underlying EPS decrease of the same amount. The Board has determined a first half '21 fully franked dividend of $1.124 per share, representing a decrease of 3.4% on first half '20. The dividend can be fully funded from retained earnings and represents a payout ratio of 90% of underlying NPAT, in line with our dividend policy guidance. Amid the mixed outcomes of first half '21, ASX is continuing with its strategy to strengthen the foundations of our business while investing in both core and adjacent growth opportunities for the future. With that, I will hand back to Dom. Thank you. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [3] -------------------------------------------------------------------------------- Thanks, Gillian. So before wrapping up, let me comment about the outlook. While we may not experience the extreme volatility of March 2020, ongoing global economic and geopolitical uncertainty suggests mixed trading conditions will continue. On the equities side, cash equities continue to experience buoyant conditions, although it will be challenging to repeat the COVID-driven volumes of 2H '20. And by all reports, the IPO pipeline, as I mentioned earlier, continues to be healthy. With derivatives, the RBA's monetary policy settings are expected to weigh on short-term interest rate derivative volumes, while inflation uncertainty should support trading in the mid- to longer-dated bond futures including the 5-year Treasury bond future. And expected maintenance of elevated government bond issuance will continue to drive Austraclear's performance. So in summary, ASX remains focused on serving our customers, supporting our industry and delivering to our shareholders. The solid result for first half '21 reflects the strength of our diversified business, allowing ASX to maintain its 90% dividend payout ratio. We continue to execute our customer-driven technology-focused strategy, with new products and long-term improvements in platform resilience. We are continuing to invest in contemporizing ASX's technology, increasing capacity and innovating. And finally, we're well positioned to continue delivering resilient earnings while also investing in growth opportunities. So thank you. And now I will open up to questions, first to the analysts and then from media. So I'll hand it over to someone at the back to arrange that. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Your first question comes from Andy Chuk from Macquarie. -------------------------------------------------------------------------------- Andrew Buncombe, Macquarie Research - Insurance and Diversified Financials Analyst [2] -------------------------------------------------------------------------------- The first one is just on technical services. Can you confirm the revenue impact from the change in bond roll tick size in the half and just confirm you only had a quarter impact? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [3] -------------------------------------------------------------------------------- We actually don't disclose the exact amount from that tick change, but obviously, there was a reduction in trading volume because of that. -------------------------------------------------------------------------------- Andrew Buncombe, Macquarie Research - Insurance and Diversified Financials Analyst [4] -------------------------------------------------------------------------------- Okay. Great. And just a follow-on. Are there any other changes like the bond roll tick size that you guys are considering at the moment? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [5] -------------------------------------------------------------------------------- Nothing in the near term. I think also just the decrease in trading in the short end, particularly the bills in the 3 years, there's less -- I guess, less demand from traders, which flows then a little bit through technical services as well. But I think the tick change on the 3s and the 10s had been sort of like an issue that had been around for a while with the market. And now that, that's done, I don't see anything in the near term. -------------------------------------------------------------------------------- Andrew Buncombe, Macquarie Research - Insurance and Diversified Financials Analyst [6] -------------------------------------------------------------------------------- Fantastic. The next one is just on the FY '21 expense guidance increase to 8% to 9%. You've called out elevated market-related activity as the driver. Should we expect this to unwind into FY '22 or when the market activity normalizes? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [7] -------------------------------------------------------------------------------- Well, it's certainly definitely tied up with market and market volume. So I think the answer to that is yes. But of course, it depends on your outlook for FY '22. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Your question comes from Ed Henning from CLSA. -------------------------------------------------------------------------------- Edmund Anthony Biddulph Henning, CLSA Limited, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Just following on from the cost question. If you look back on Slide 23, you've got cost growth in '17 of 6.4%, then 7% and 8% and 9%. And I appreciate some of the 9% is in variable costs. And you've also talked today about improving your technology stack at the moment. Looking forward, how should we think about your cost growth in kind of the medium term? I'd like to get a handle on it, please. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [10] -------------------------------------------------------------------------------- Sure. Shall I take that one and then you can add? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [11] -------------------------------------------------------------------------------- Yes, you go ahead. I can say something just after you. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [12] -------------------------------------------------------------------------------- I think really because of the elevated trading that I do think we thought this may be an aberration of what had happened with COVID. We really didn't expect that coming through into this year. Now we're happy with that, it's all good, but it does come at an extra cost. So I think we have gone to market before and said that really the last 2 years where our heightened expense profile would be. So really that variable bit has changed that. So I would have thought we would go back to what we said last half, which was if you look at the longer-term run rate of expenses, prior to the time of stronger foundations, we were 5% to 6%. And I would still think that, that was our longer-term outlook. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [13] -------------------------------------------------------------------------------- Yes, I think that's right. I think we were sort of -- without the sort of more volume-related things, we probably would have come down this year. And then probably thinking back COVID, even things like people are taking lesser leaves, so that actually -- there's little bits and pieces that give you sort of uplift into this half, which probably will unwind over the future. So I think Gill's right that what it's done is actually extend this growth. But if you take that growth away, it should come back in future years. -------------------------------------------------------------------------------- Edmund Anthony Biddulph Henning, CLSA Limited, Research Division - Research Analyst [14] -------------------------------------------------------------------------------- And that elevated cost in the near term, is that just around the equities trading, I would imagine? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [15] -------------------------------------------------------------------------------- That's what we have said. Yes. -------------------------------------------------------------------------------- Edmund Anthony Biddulph Henning, CLSA Limited, Research Division - Research Analyst [16] -------------------------------------------------------------------------------- Yes. And then just a second question on the growth options, which you've again talked about, should we think about this as more kind of a 5- to 10-year plan to see it as material profit earner for the group? Or can you get some decent profit coming through in 3 to 5 years? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [17] -------------------------------------------------------------------------------- I think my call on that is 5 to 10 years is probably too long. I think it is more 3 to 5 years to see these things coming through. So I think, as I said, DataSphere actually has got some things on the go, and they sort of -- there's a lot of interesting data in the fixed income area that I think could be helpful to both banks and custodians. They're doing some work on the electricity front, as I said. I think we've got over some of the regulatory hurdles with Sympli. And also, as I've said in these meetings in the past, one of our big issues have been just being able to get traction with the banks, just given the huge technology programs that are going on there. And we've now sort of bedded that down, and that should play out over the next couple of months. So we're sort of feeling positive about that. If that's... -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Your next question comes from Ashley Dalziell from Goldman Sachs. -------------------------------------------------------------------------------- Ashley Dalziell, Goldman Sachs Group, Inc., Research Division - Equity Analyst [19] -------------------------------------------------------------------------------- Just an initial question on the outlook for your D&A charge. It's been pretty flat for a few periods now despite, obviously, CapEx running at pretty elevated years -- elevated levels for a few years and a lot of discussion in the presentation today about your tech stack running at a much lower average life. When do we start to see that D&A charge tick up? And sort of similar to the questions you've been getting on expenses. I mean what does a normal CapEx charge look like for the business? Do we still think 50 is kind of the baseline post some of these projects? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [20] -------------------------------------------------------------------------------- Sorry to say, I don't think we have the answer to that last one. I think as we are so focused at the moment on CHESS replacement that we probably aren't looking at a normalized CapEx number right now. We're very focused on what our build is at the moment and to give you the numbers certainly for the next 6 months. If I can just take back a step, we're actually currently undergoing projects with longer duration. So what is happening is, as we've obviously got a program, we're obviously managing, we know what that D&A line is because we're very aware of the projects coming on and off. And I think I have talked about the last 2 halves, where just fortuitously, old projects or programs that were 5 years, 6 years long-dated, but they've actually come off making room for new ones. So for instance, last half, we had secondary data center that went live, and now that's popped into D&A. But we've had old 5-year systems that have come off. So obviously, that number looks smooth. It is what it is because we do have a program of work that we're managing. However, obviously, with that number that we've gone to market with CapEx, you will probably conclude that when we go live with CHESS in April 23, that D&A line will go up. And I think we'll give further ideas of that when we come into the full year results. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [21] -------------------------------------------------------------------------------- Yes. Yes. Look, I think that's right. It's interesting, I think, Ashley, if you look at the that chart of sort of like the average age of tech and almost like tip it upside down, it would reflect all the way going back to -- there was a bit of a buildup in expenses around 12, 13 or around that time. You saw that in here. And so I guess if you're saying, well, once we get through this last piece, which is CHESS and some of the enterprise data warehouse pieces of the tech which really completes that whole program, there isn't any major projects to do probably for a long time. We'll turn our focus back to some of the work on the derivatives side, although we have done NTP. And If you look at the derivatives stack, it also includes the secondary data center around ALC and ASX Net, which have already been done sort of like on an enterprise basis. And I think the second stage of that, when you look at derivatives, that will be sort of more integrating into what we've got rather than building from scratch. So we would think about can Austraclear become sort of like integrated with CHESS? The data warehouses that sit in the derivatives business, can they be integrated with what we've got on the equity side? So I see that as less sort of, like, how would I say, building from scratch, but more sort of using what we've got. So I think I think it does. Once we get through this CHESS piece, which is, obviously, this year and the next, mainly, then I think we come down from there. And really, I guess, I think Gill's just talking to actually we'll give you more dialogue on that at the full year about the trajectory of that into the future. -------------------------------------------------------------------------------- Ashley Dalziell, Goldman Sachs Group, Inc., Research Division - Equity Analyst [22] -------------------------------------------------------------------------------- Okay. Just a final question on interest income. You called out, I think, an exit spread or December spread on participant balances at about 10 basis points. Based on spot interest rate settings, is that a pretty fair guide for the foreseeable future? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [23] -------------------------------------------------------------------------------- Yes. I think we're both fair. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [24] -------------------------------------------------------------------------------- Yes. I think that's about -- 10 is about where it is. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [25] -------------------------------------------------------------------------------- That's right. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Your next question comes from Matt Dunger from Bank of America. -------------------------------------------------------------------------------- Matthew Dunger, BofA Securities, Research Division - Research Analyst [27] -------------------------------------------------------------------------------- I take the point on the cash market outages being infrequent. What implications are you expecting, Dom, on the business from these outages, including market share? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [28] -------------------------------------------------------------------------------- I think -- well, the first thing is, if -- even though it's interesting, like, you look at that previous history, and you can see there's been a lot of really good work done. But it does actually focus the mind again. And so there will be a lot of sort of -- well, there has been a lot of internal focus on even given all the good stuff we've done, how can that happen and how can we stop that never happening again sort of thing because it's a very painful thing. As far as market share goes, I think if you follow those charts, there hasn't -- there's been a lot of changes. There's been a lot of interesting changes around market share, probably less related to this. There's been -- I think the value of actually the lit market has come through, through this volatile period. So you've seen -- actually, as we've been talking over the last sort of like 4 or 5 years, you've probably seen a trend towards -- go back 3 or 4 years, there was more growth in Centre Point and then more recently, more growth in Auctions. That sort of turned around a bit to being very much a lit market. That's also, I think, actually changed market share around brokers, crossings or whatever, back to the lit market, as it's probably harder, I guess, to do crossings in a more volatile market. And probably ASX, Chi-X has remained -- it probably -- our market share strengthened probably over the last couple of years, and it's just sort of remaining around similar levels. So probably my best guess into the future is probably not too dissimilar to where we are now. -------------------------------------------------------------------------------- Matthew Dunger, BofA Securities, Research Division - Research Analyst [29] -------------------------------------------------------------------------------- Great. And if I can just touch on the adjacencies, again, you've called out DataSphere, electricity and Sympli. Are these the key opportunities that you're looking at from the adjacencies? Is there a revenue benefit from the DAML release you talked about in the coming months? What's the opportunity there? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [30] -------------------------------------------------------------------------------- I think the -- in the early stages, I think the answer to that is sort of like, yes, in the sort of like in the near to medium term, maybe small in that stage. But I think the benefit more lies once actually producing the platform into the market that then actually allows people to actually build on top of that. And I think what we will see in actually having an environment out there that people can actually get on to and play with and try and understand the benefits and the ability to actually do things on the system or, in fact, not just CHESS, but on other perhaps distributed ledgers or, in fact, even just normal data bases, I think that's where that growth sort of comes. But as I said in the beginning, particularly because of the increased volumes, the increased need for digitization, our focus has actually been on what has become actually more of an enlarged CHESS. CHESS is now a bigger project than it was 3 or 4 years ago just because the world has become a bigger place. And the -- when we started this project, the equity market's peak volume was roundabout $2 million. It's now sort of north of $7 million. And so that just changes things. But I'm still a huge believer in the efficiencies that can be brought by effectively having a source of truth that's more available and more reliable and actually more accessible by people in the market. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Your next question comes from Andrei Stadnik from MS. -------------------------------------------------------------------------------- Andrei Stadnik, Morgan Stanley, Research Division - VP [32] -------------------------------------------------------------------------------- I just wanted to ask 2 questions. If I can ask, firstly, just about price increases. Are there any meaningful price increases that are going through or have been going through any of the business lines? -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [33] -------------------------------------------------------------------------------- We did make an announcement probably about 2 months ago that there would be some price changes in our Technical and Information Services business, and that will come into effect on the first half '21. So that will certainly assist that business for the next half. That is all. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [34] -------------------------------------------------------------------------------- So second half '21. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [35] -------------------------------------------------------------------------------- Yes, second half '21. -------------------------------------------------------------------------------- Andrei Stadnik, Morgan Stanley, Research Division - VP [36] -------------------------------------------------------------------------------- Got you. And my second question, can you maybe comment a little bit more on the growth opportunity and maybe some of the headwinds for Sympli because the government and ACCC clearly are crying out for more competition in the space. But Sympli really still hasn't connected to the major banks in a proper way. Was it the COVID disruption holding Sympli back? What do you expect with Sympli going forward? And when can this business break even or have meaningful operation or scale? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [37] -------------------------------------------------------------------------------- Yes. No, it's a really good question, interesting question. I think it -- maybe the COVID thing sort of, I guess, added to everything. Everything is just a little bit harder. I think the main thing was, if you go back to when we first sort of like looked at this, it was actually pre-Hayne. Hayne actually, I think, slowed down a lot of -- or not slowed down, probably speeded up the work going on in financial institutions, but made it more difficult to sort of like get the attention and get new projects through for something sort of like out into the future. What came on top of that was issues around AUSTRAC, which was, of course, in the payment space, and that made it even harder to get resources around payments, if you think about it because they were all sort of fully focused on various issues. That's actually changed. And we're now working through the detail. We have -- we are connected to the Central Bank. We've had one of the major banks connected for some time that we're working with. And we've got 2 of the last 3 happening in the next couple of months and then one after that. So that's when we get to the point. The thing I would say is that, like, if you think about all of the conversation that goes around ASX's settlement business in equities, for example, which is sort of maybe a $60 million revenue business, probably processes millions of trades a day, this is a business that has a $0.25 billion of revenue and actually processes a significantly lower amount of transactions a day. And I think the conversation around the market around PEXA itself, I think, just has started to show that there's a significant value in that business. And if you look out into the future of a world that perhaps even doesn't have stamp duty, perhaps that value is even greater. And so ASX sees that as an attractive -- and InfoTrack, which is a very, very large player in that space in the search and also in the conveyancing software world, sees that as a very important opportunity. And so for us, we definitely -- usually, we see ourselves as the sort of the incumbent that's been around. But in this thing, obviously, we're not the incumbent but we see a huge opportunity. We think we've got a good proposition to market. We've just got to get that connected. And I think the team has done a great job around getting the states, the ACCC, the government to understand that, that's an important thing and also to get the banks on board for that. And hopefully, once we get those connections, we can start getting transactions flowing through that system. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Your next question comes from Nigel Pittaway from Citi. -------------------------------------------------------------------------------- Nigel Pittaway, Citigroup Inc., Research Division - MD & Head of Pan-Asia Diversified Financials and Insurance [39] -------------------------------------------------------------------------------- First of all, a question just, if I could, on collateral balances. Are you -- can you maybe help us unpick the movement in those? They do seem to still defy gravity even though, obviously, sort of derivatives volumes are under pressure. So can you just sort of help us understand what's going on with those, please? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [40] -------------------------------------------------------------------------------- Yes. That's probably quite a long story, but I guess it's -- Nigel, a lot of that is to do with open interest. And probably what it's to do also is with open interest with actually contracts which have a large DV01. So in fact, the 10 years. And if you look at the 10 years, actually, volumes have increased in that. And then in the equity markets, where there's also large margins because the ability of that contract to move is large, and that creates a reasonably significant amount of collateral balance that goes with it. So it's mainly driven by the 10s and the in the equity market. Obviously, there's offsets or whatever that are going on into a contract. But given that the 10 years is up, the equity market is probably sideways as far as volume goes and open interest. The other thing I would say is that margin as opposed to just positions, margin levels are still elevated because the world is still a volatile place. Now those things will come down over time. But one thing that's being discussed a lot globally in the regulatory space is actually the procyclicality piece. And what I mean by that is that, like, when things get quiet, margins sort of drift down and then when things get busy or volatile, margins shoot up. And I think regulators want to sort of dampen that down. And what that means is probably higher margins in low volatility times such that actually, you don't have that effect so much. So I think they will come back, but maybe not as far as they might have going back to 2018. Does that make sense? -------------------------------------------------------------------------------- Nigel Pittaway, Citigroup Inc., Research Division - MD & Head of Pan-Asia Diversified Financials and Insurance [41] -------------------------------------------------------------------------------- Yes, it does. It's pretty helpful. Secondly, I mean, obviously, you've discussed a bit about Sympli already. Obviously, the interoperability is a positive. But I can't help feel those sort of delays that you've already sort of highlighted sort of just helping with first-mover advantage. I mean is -- can you sort of -- or a, do you agree with that? And b, sort of what sort of strategies can you adopt to overcome that? And I guess, thirdly, will that -- will price be the main component of that? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [42] -------------------------------------------------------------------------------- Look, that's a good question. I totally agree that this is sort of -- I think when Sympli came into the market and because, actually, the government sort of like mandated the use of the electronic conveyancing, I think that what that meant really is, obviously, there's a first-mover advantage there. Sympli is the second-mover. And actually, it will have -- it has advantage on price. But it also has advantage on a much more modern and recent system. And I think what our job is to do is just to work with the banks and work with the conveyances to make it a better experience and a better product. So really, it comes down to first-mover advantage versus, hopefully, a better product. And if we look at how many clicks it takes, how much real estate on the page, how much of the mouse moves, how hard it is to do X amount of transactions, how much preloaded information, et cetera, et cetera, goes through, we think we've got a better proposition. And so I think it will rest on -- this is actually a better process and a cheaper process. And so that will get the eyes of banks and conveyances over time. But I certainly accept your point, Nigel, it's a -- we're battling first-mover. -------------------------------------------------------------------------------- Nigel Pittaway, Citigroup Inc., Research Division - MD & Head of Pan-Asia Diversified Financials and Insurance [43] -------------------------------------------------------------------------------- Okay. And maybe just finally, I mean, a lot of these questions have already been answered. But I mean on the LT project, obviously, you sort of keep emphasizing that you think it will unlock future revenue streams. But obviously, it's hard to sort of pin that down as to what exactly that means. I mean when do you think you'll be in a position to sort of be able to a little bit more precise about what the potential -- what potential you actually see from that? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [44] -------------------------------------------------------------------------------- Actually, I think that we're -- as I said before, we're pretty much -- apart from the new things that have been added that are sort of like what this probably half is mainly about as far as, like, functional software goes, we're pretty much sort of like completed on that side. I think where the project is moving is away from being a build to being an implement. And that's a long implementation because you're actually changing an infrastructure of a system. But I think that -- what that does allow is that the builders and the ideas people and all that sort of the thing to start moving on from there. So I think I'll -- just for you, I'll plan to talk about it a little bit more at the full year. But I think that when the system's more handed over to the market and to more our operations people away from the build side, I think that gives people a chance to maybe sort of spend more time on that, and we can talk more about it. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Your next question comes from Siddharth from JPMorgan. -------------------------------------------------------------------------------- Siddharth Parameswaran, JPMorgan Chase & Co, Research Division - Research Analyst [46] -------------------------------------------------------------------------------- A couple of questions, if I can. First one, just on the Information Services & Technical Services revenue lines, we saw that there was some fall in market access revenues. I was just wondering if you could just comment on what actually happened there and whether that's likely to be an ongoing feature, noting that we're seeing quite strong growth in those revenue lines in the past? And also just -- I think you touched on some pricing changes. Maybe if you could just comment how much that should actually boost revenues going forward. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [47] -------------------------------------------------------------------------------- So maybe I'll answer the first one. I'm hoping that I heard you right, Sid. I think you asked about market access revenue decrease, was that correct? -------------------------------------------------------------------------------- Siddharth Parameswaran, JPMorgan Chase & Co, Research Division - Research Analyst [48] -------------------------------------------------------------------------------- Yes. That's right. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [49] -------------------------------------------------------------------------------- Yes. So it is through our liquidity cross-connections future sessions. So basically, just we've had less demand for that. And so because of the interest environment that we're currently in, there's just been less demand. It's as simple as that. So the average is down 13%. So -- now what was the second question, sorry, Sid? -------------------------------------------------------------------------------- Siddharth Parameswaran, JPMorgan Chase & Co, Research Division - Research Analyst [50] -------------------------------------------------------------------------------- So just to be clear on the first question, just in terms of outlook from here. So should we think that it will remain at these levels? I mean that just continues on for... -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [51] -------------------------------------------------------------------------------- I think -- in this environment, I think, it might be right... -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [52] -------------------------------------------------------------------------------- Yes. I think that's right. I think as was mentioned earlier, the -- there's a bit of the bond roll tied up in that. That's become a sort of a slightly different process. Also, there are probably -- there seems to be more trading in the 10 years, but obviously, less trading in the bank bills and the 3 years. And whenever there's that, that flows back through to the services that people need to actually connect to actually make those transactions. So Sid, my gut feel is that, yes, it probably has come down to 11, and it probably doesn't go further. Like I'm hoping that given the 5 years is now starting to -- the 5 years is actually starting to trade with a little bit of -- quite an interesting amount of open interest in daily trading, which is sort of at the levels where prop might come into that market to actually narrow the spreads and increase liquidity. So maybe there's a little bit of an offset there, but unless we see futures market's volumes sort of drop again, I think that it is probably -- it's come down to a level and then hopefully either go sideway or build from there. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [53] -------------------------------------------------------------------------------- And I think the difficulty for us is because the growth was so high, initially around FY '18, FY '19. I mean, we're about 10% there. So I think really looking -- that dropped then off in FY '20 to about 4.5%. So I think really, you've sort of got to look at that as the run rate going forward. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [54] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Siddharth Parameswaran, JPMorgan Chase & Co, Research Division - Research Analyst [55] -------------------------------------------------------------------------------- Okay. That's clear. And sorry, there was a second part to my question, which was just the fee changes there. You touched on the fee changes, but I don't think you gave us the quantum. -------------------------------------------------------------------------------- Gillian Larkins, ASX Limited - CFO [56] -------------------------------------------------------------------------------- No. But if you actually look on our market web page, sorry, I don't have it on me right now, you will there see quite explicitly what those fee changes are for our products. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [57] -------------------------------------------------------------------------------- Yes. And there's a myriad of all of them, so it's best to just look. -------------------------------------------------------------------------------- Siddharth Parameswaran, JPMorgan Chase & Co, Research Division - Research Analyst [58] -------------------------------------------------------------------------------- Okay. Okay. That's fine. And just the last question, just the increase in CapEx on CHESS, is there -- are there any thoughts of actually trying to recoup this? I mean it seems like a lot of your justification for actually -- for this increased spend is participants want -- crying out for more, I suppose, size, et cetera. Yes. So just in terms of your thoughts around funding this. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [59] -------------------------------------------------------------------------------- I think we have -- we've sort of said that we will -- obviously, it's -- we're the market operator, and we will upgrade the system and what changes the need for that -- the needs for that system has changed. And that's, I guess, neither the market's or our fault. It's just that the size of that has increased. And a lot of ways, Sid, if you think about it, the -- if I go to the scale and scope there, if I go to scope, that scope that would have been in CHESS 2.0 has come into CHESS 1.0. So it's actually -- it's just bringing forward something that would have been done at a later date. And even though I don't think we'd ever -- we'd probably budgeted for the middle of the next decade to do sort of like maybe an upgrade that might have done the scale side of things, probably, it means that we won't have to then do that in 5 years because we have actually -- we're trying to look at how do we actually get to a system where, really, we don't have to worry about volume for a very long time. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Your next question comes from Kieren Chidgey from Jarden. -------------------------------------------------------------------------------- Kieren Chidgey, Jarden Limited, Research Division - Analyst [61] -------------------------------------------------------------------------------- Just one follow-up question and one additional question. On Sympli, I know you've had a range of questions, Dom, but I just wanted to be clear, from an interoperability point of view, which obviously, the government is keen on, how long do you think it will take to get the plumbing in place for that to work? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [62] -------------------------------------------------------------------------------- I -- that's a hard one to answer. So obviously, I think as I said before, the government, they're talking about legislation sort of like back end of this year or sort of working at -- maybe I can come back to you on that one because there's conversations about exactly how that would happen. And so actually, how long that would take? We think it's basically, in some sense, a simple API between the 2 [L&Os]. But I'm not sure of the most recent drop of where that's being looked at. So I can come back to you, Kieren. -------------------------------------------------------------------------------- Kieren Chidgey, Jarden Limited, Research Division - Analyst [63] -------------------------------------------------------------------------------- All right. And secondly, just on your cash equities business. Just having a look at the mix of volume that's come through there over the last half. Obviously, very good volume growth in value traded overall on market. But most of that in sort of the open trading through the day with Centre Point and Auctions pretty flat on pcp. So just interested in your thoughts on the dynamics that have played through the market and sort of whether or not you say those are the 2 higher-margin categories doing better on a go-forward basis? -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [64] -------------------------------------------------------------------------------- Yes. It's a really interesting question, actually. It's -- it has been interesting to us, and I guess, particularly through the volatility in the middle of last year that a lot of the volume went back to the lit market probably because there was a lot of -- what the lit market is about is about price discovery. And so it wasn't as if markets were opening and trading around that price and then sort of closing at that level. It was like there was a lot of intra-day price discovery going on, which sort of leads you to the lit market. And I wonder whether with rising volumes, what it means is that auctions haven't gone backwards. What's happened is that there's just more lit market trading. And my gut feel is auctions have probably just haven't sort of like grown as much as the others because the demands at the end of the day are probably demands for rebalancing, which maybe not reflective of the amount of price discovery happening but more reflective of just how much rebalancing has to be done, so not as connected perhaps to the market. I am sort of speculating here. So I think that if volatilities were to slow down a bit, I think probably you would see less lit market, more auctions. And perhaps, Kieren, maybe a bit of a move back towards -- there's probably a few more broker blocks get done because the volume of that has actually dropped a bit over the last year or so, too. -------------------------------------------------------------------------------- Operator [65] -------------------------------------------------------------------------------- There are no further questions at this time. I'll now hand back to Mr. Stevens. -------------------------------------------------------------------------------- Dominic John Stevens, ASX Limited - MD, CEO & Executive Director [66] -------------------------------------------------------------------------------- Okay. Thank you. Thank you, everyone, for your time. Thanks for the questions, and good luck. And we'll speak to you again in 6 months. Thank you.