ASX Ltd (ASX: ASX) announced today that its third quarter revenue was up 7% mainly due to new listings and increased derivatives and OTC trading.
The ASX also provided an update on the Clearing House Electronic Subregister System (CHESS) replacement project with the new ASX CHESS DLT system expected to go live in late 2020 – early 2021.
The ASX's financial results and update for the 9 months ended 31 March 2018 were presented at the Macquarie Group Ltd (ASX: MQG) conference held in Sydney this morning.
There are a couple of reasons why an investment in the ASX would make sense as part of a diversified portfolio.
Moat
While I don't think the ASX will provide 10x returns to investors anytime soon, it does have significant competitive advantages that make it a solid investment. Whilst Chi-X Australia exists as an alternative, the ASX retains the lion's share of the market. Even if other potential competitors could overcome the regulatory hurdle of setting up a rival exchange in Australia, the ASX still enjoys the advantages of the network effect that make it difficult for participants to leave.
Age of cryptocurrencies
As innovation and technology progress, we could see more financial products being traded more frequently on the ASX. The options are potentially endless with the rise of high frequency trading, derivatives and perhaps we could even see a future where Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are traded on the ASX.
Risks
There are risks that could impact the ASX's growth plans. The ASX is the 16th largest global exchange by market cap and so investors could continue opting to invest on the New York Stock Exchange or Nasdaq where there are more businesses. There is also the outside chance of a cyber-attack creating losses for the ASX. Although the chances of this happening are quite low, if it did happen it would be catastrophic.
If you are looking for more stable and profitable business, try these 3 ASX blue chip stocks.
