The way in which the Chi-X “minnow” has been swallowed by a much larger creature is indicative of where the world is headed, says Vic Jokovic, CEO of stock exchange interloper Cboe Australia.
Vic Jokovic’s dad had a second job at an abattoir. He would bring home great chunks of meat for young Vic who’d then jump on his bike and take off down to the Parramatta River with his mates. There, they’d run a giant hook through the offcut flesh and throw it in, attached to the thickest rope they could scrounge … And they would wait.
Everybody knew about sharks and blood in the water. Even a bunch of kids from the English-as-a-second-language class.
“If there was nothing else, we’d tie the line to our bicycles,” he recalls, animated, now sitting high up in a Sydney office tower in a crisp shirt and tie. “There were many times we would have lost our bikes if we hadn’t been there … We’d be pulling in massive sharks. There were feeding frenzies.”
Jokovic, now CEO of stock exchange interloper Cboe Australia and still a devoted fisherman, declines to turn the tale into a metaphor for the big fish he’s currently targeting – the ASX and its hold on the Australian investment landscape.
Cboe, formerly the Chicago Board Options Exchange, entered the Australian market in the middle of 2021 when it acquired Chi-X, the disruptor exchange that came to Australia in 2011 to break the ASX’s monopoly.
Jokovic had come on board Chi-X as CEO in 2018, aged 54, after a 27-year career at Deutsche Bank where he had run the global markets business. The need for competition was obvious. “There were years during the GFC we (Deutsche Bank) were paying the ASX more money than we were making for the year,” he recalls. “It was incredibly expensive to transact – and still is – via the ASX … Most of the ASX’s limbs are monopolies. There’s no pricing tension.”
But Chi-X did not have an immediate impact on fees, he says. “I don’t think anyone believed in 2011 that a firm with seven people was going to compete with the 700 people sitting across the road at a firm that had been around for 150 years.” That started to change around 2015.
“We’ve been able to take roughly 20% of equity volumes … We would trade $1.5 billion to $2 billion in Aussie equities. But most mums and dads would never have heard of us. We’re invisible to the end user. If you buy shares, be it through CommSec or a broker or whatever, that broker uses a smart-order router. It will go to both exchanges on the basis of best execution, best price … you’ll get your confirmation of trade, and it won’t say which exchange it was executed on.”
Despite the computer-levelled playing field, the ASX still has a home-team advantage. “There’s 150 years of familiarity of connecting to the ASX. There’s a mountain of work to do to connect to a new exchange and make sure that it works … It has been a journey over 11 years to connect almost every stockbroking firm in the country.”
Cboe claims 35% of the warrant market, 35-to-40% of the exchange-traded fund market. “Now it’s about connecting the entire ecosystem,” Jokovic says. “It’s a grind … We don’t compete with the ASX on derivatives, on futures options …on clearing and settlement … yet.”
He says the reason why sits around “the amount of work involved, the bureaucracy involved … there are many regulatory hurdles”.
Cboe staff numbers have doubled to 60 in the past six months and the 30 new heads are all tech engineers, says Jokovic.
“They’re punching away at building the technology stack that allows Cboe to do all those things it does across the globe. Cboe is the largest clearing house in Europe … Once you have the technology in place you can go out and do it. We couldn’t have done that with Chi-X with our technology.”
The way in which the Chi-X “minnow” has been swallowed by a much larger creature is indicative of where the world is headed, says Jokovic. “The big exchanges are getting bigger. They’re monster exchanges with market caps of 50 plus billion dollars. The ASX market cap is $10 billion to $15 billion. It’s small compared to the big guys.
While size is one thing, Jokovic says the longer-term lies in access to global equities being sold in one market. “There are hurdles when you cross borders in terms of information … and time differences, different taxation authorities, but those things will be solved over time. The big exchanges get bigger and the country-centric exchanges, I’m not just talking about the ASX … will be increasingly running into these global exchanges.”
Jokovic remains a mad-keen fisherman. From private salmon lodges in Vancouver, to his tinnie on the gentrified Parramatta River, he still gets out every chance he gets. “I’m broad in the way I think about fishing. I’m not just focused on one type. I’ll try and catch anything in any way. I reckon I’ve tried more types of fishing than those commentators on TV. There are thousands of different ways to catch fish. I don’t know how you draw that into a metaphor. If the trout aren’t biting, maybe something else is.
“And patience. The Chi-X/Cboe story is a short one. We will need patience and time to do all the things we want to do.” Jokovic would have us believe the blood is in the water.