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Rise of the machines: Automation, AI and the ASX

In 1908, Henry Ford revolutionised the car industry with the implementation of the production line for the Model T Ford. The process of mechanisation lowered costs and sped up production, allowing the car to go mainstream and replace the horse and cart.

The advent of the personal computer and its evolution over time has allowed significant increases in data flow and streamlining of work processes. While this initially led to a loss of some jobs in areas such as typing pools, this was more than offset by an increase in the number of more productive jobs as well as increased productivity among office staff.

More recently, there have been a number of new initiatives floated that have the potential to significantly disrupt the equity markets and financial services sectors.

On the equities front, the ASX has spent the past few years (and a reported $20 million) working with New York-based Digital Asset Holdings developing the use of blockchain distributed ledger technology for the clearing and settlement of share trades.

While most of the activity around blockchain activities has focussed on its use as the basis for Bitcoin and other crypto-currencies, the ASX is working on a private ledger model that would be the single source of truth for the clearing and settlement of trades, replacing the current CHESS system that has been around for 20 years.

The new system, to be rolled out in 2021, will see all buy and sell trades directly entered into a single platform, simplifying the back office transaction matching requirements. While this may result in a loss of some back office jobs, it will provide a more accurate system and allow brokers to focus on their core competencies.

In the financial services sector, the use of artificial intelligence is being used to streamline M&A transactions by using AI to review huge volumes of data to identify and answer key areas of concern.

Sydney-based Ansarada has developed a ‘virtual deal room’ that allows companies and their advisors, both buy and sell side, to streamline the due diligence process, investigating the likely areas of risk in a transaction.

By analysing risks early, there is the potential to either stop bad deals happening or mitigate the risks for the buyer or seller.

Deloitte has launched its iDeal M&A analytics product, which similarly uses AI to delve deep into company data to assess where the potential risk points are in a transaction. Where a team of lawyers and accountants would have spent weeks trawling through reports, iDeal is able to process and interpret large datasets in order to highlight the areas for further investigation.

In the resources sector, autonomous and driverless trains and trucks have become commonplace on iron ore projects in the Pilbara. At the recent Fortescue Metals Group AGM, Chairman Andrew Forrest said that he was “really excited” by artificial intelligence.

“Artificial intelligence will surpass human intelligence and by many factors within decades if not years,” he said.

“It’s not to be feared, but to be engaged – it must be engaged in the right way.”

Once again, these technological advances have the potential for some job losses, however they are likely to be more than offset by the creation of strategic roles which see us continue to challenge and improve the way we do business.

Andrew Rowell is an expert in Investor Relations and leads a Cannings Purple team that has advised on more than 115 M&A transactions with a combined value of US$130 billion over the past 12 years. We placed first on Business News’ PR League Table in 2017-18 and are again leading the field this year. Contact Andrew

Image by Photo by Franck V. on Unsplash