ASX : AGM 2016 - Chairman and CEO speeches

1

Good morning ladies and gentlemen. Welcome to the 2016 Annual General Meeting for ASX Limited. It is 10.00am and we have a quorum present; I now declare the meeting open.

Can I ask everyone to please turn your mobile phones off, or switch them to silent?

Before we commence the formalities, I would like to acknowledge that this AGM is being held on the traditional lands of the Gadigal people. I pay my respect to elders both past and present.

These proceedings are being webcast and the prepared speeches have been released to the market and published on our website.

Let me introduce myself and my colleagues.

I am Rick Holliday-Smith, the Chairman of ASX.

From my far right we have directors Ken Henry, Melinda Conrad, Peter Marriott and Heather Ridout.

On my left we have our General Counsel and Company Secretary Amanda Harkness, our Managing Director and CEO Dominic Stevens, and then directors Peter Warne, Yasmin Allen and Damian Roche.

2016 was another strong year for ASX. Your company achieved record financial performance and we continued to invest in innovation, improve our service to customers and strengthen our competitiveness.

As you all know it's also been a year of renewal, with the appointment of Dominic Stevens as ASX's new Managing Director and CEO.

At the same time, it's also been a year of reflection, with the commemoration of a number of significant anniversaries.

These include:

• 15 years since the launch on ASX of Australia's first exchange-traded fund, or ETF

• 25 years since the listing of the Commonwealth Bank, now Australia's largest public company

• and most profoundly, it's been a decade since the merger of ASX and the Sydney Futures Exchange.

The successful merger of ASX-SFE created one of the world's first multi-asset class, vertically integrated exchanges. The combination offered an extensive range of equities and derivatives products, alongside trading, clearing and settlement services. This created a structure now recognised as the most desirable business model for exchange groups around the world.

All of these developments, in my view, have been beneficial for Australia's financial markets and for ASX.

They should remind us that change can bring opportunity; that having a vision for the long-term is paramount; and that ASX continues to play a central role at the heart of Australia's financial markets.

We are proud and privileged to play this role.

We are also grateful to you, our shareholders, for your support.

Pleasing overall performance in FY16

up 6.5%

Operating revenue

up 6.5%

Operating expenses

up 7.1%

Statutory profit after tax

up 5.7%

Dividends per share

Revenues and expenses as per the Group segment reporting

In 2016, ASX produced record revenue and earnings, with growth in all our key business areas.

Operating revenue was $746.3 million, up 6.5%, and statutory profit after tax was $426.2 million, up 7.1%. Operating expenses increased 6.5% and our capital expenditure was $50.2 million.

Both of these reflect the investments we are making in new technology and post-trade services.

This strong performance was supported by healthy market activity levels and the success of ongoing business initiatives, which are giving customers greater choice and control.

Market activity was driven by an increase in secondary capital raisings, particularly within the financial sector. And also by heightened volatility in interest rate markets, culminating with the surprise of Brexit in late June.

The average value traded on ASX's equity market rose almost 10% to $4.2 billion per day; futures and options turnover grew 8% through the period; and there were 124 new listings, the most in five years.

The Board determined a final dividend of 99 cents per share fully franked. This was paid today. This took fully franked dividends for the full year to 198.1 cents per share, an increase of 5.7%.

Following our regular review, we have maintained our dividend policy of paying out 90% of underlying net earnings.

ASX is the one of the most efficient exchange groups in the world. Our size and business mix enable us to make investments to meet the highest global standards and to provide Australia with world-class infrastructure. This supports market quality, investor confidence and shareholder returns.

On Monday of last week, we failed to live up to our own high standards, and the expectations of our customers.

A hardware failure led to the equity market being unavailable for most of the day.

We are sorry for the considerable disruption to market users, including retail investors.

We put significant effort into building the resilience of our platforms. We will now do even more. Our CEO will cover this topic later.

On 1 August 2016, we were pleased to announce the appointment of Dominic Stevens as the company's new CEO.

This followed an extensive search process, over many months, using professional consultants.

Dominic has settled into his role with remarkable speed. Those of us who worked alongside him on the Board when he as an ASX director, or encountered him when he was CEO of Challenger, are not surprised by how well he has taken to the task.

Dominic is highly regarded in the financial services industry, and has the right experience and expertise to build on ASX's achievements.

I would also like to thank our previous CEO, Elmer Funke Kupper, for his successful stewardship. Elmer resigned in March 2016 after almost four-and-a-half years in the role.

Elmer was a strong, popular and energetic leader. He helped create a more globally competitive, externally focused and innovative company. He left ASX in good shape and with a strategy that's delivering positive results.

I would also like to acknowledge ASX's executive team and all our staff. I appreciate their focus and professionalism during the months we were searching for a new CEO.

In March 2016, the Government provided clarity about the medium-term market structure for cash market equities clearing. This enabled ASX to continue investing in infrastructure that meets global industry standards, and provides opportunities for productivity gains and innovation.

This includes the development of distributed ledger technology - or 'blockchain' - as a possible replacement for CHESS. CHESS is the core system that underpins the post-trade processes of Australia's cash equity market.

ASX and our partner, Digital Asset Holdings, have been assessing how blockchain technology could be applied to financial markets.

We made good progress this year. Dominic will speak more about this project shortly. The CHESS replacement project is not ASX's only investment in the future.

In March 2016, we successfully introduced T+2 settlement. The reduction in the settlement period from three days to two has provided efficiencies for the market, reduced systemic risk, and kept Australia at the forefront of global best practice.

We've also made good progress on the delivery of a new futures trading platform. This is an important part of ASX's technology transformation program. ASX is working closely with customers to ensure the smooth delivery of a high quality system. Industry testing is underway, with an expected implementation date of February 2017.

With ASX's strong reputation, our listings market continued to be an attractive venue on which to list, raise capital and build long-term wealth. Maintaining that reputation is one of our core objectives. We have around 2,200 companies listed on ASX, and almost $80 billion in capital was raised through IPOs and secondary raisings last financial year.

In 2016, we introduced new governance arrangements for this listings business to give the ASX Board stronger oversight of ASX's brand and reputation. We proposed new admission requirements to provide the market with enhanced guidance about the standards expected of an ASX-listed company.

The related consultation process was constructive and we received a large number of high quality submissions. We will provide a response to the consultation feedback and expect to release the new changes to the listings admission requirements in October.

There was universal agreement throughout the consultation process that a market of quality and integrity is valuable to all users. We share that view. This is a journey of improvement that will be ongoing.