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An Appetite for Disruption
July 24, 2023
Alasdair Haynes, CEO, Aquis Exchange PLC
Disruption was at the heart of Aquis’ foundation in 2012, and to this day remains a part of our DNA.
In a Vodafone shop, purchasing my son’s first phone and surrounded by mobile phones with various bells and whistles from the low starting price of £9.99 per month, I first realised the true disruptive power of a subscription model.
Subscription models change economics, and they change behaviour. At that point in time, the Netflixes and Spotifys had already swung the axe for the legacy industries of video rental and CDs; the reaper was on its way for the industries of automotives, fitness, gaming and more.
So why not trading?
So why not trading?
The structure of equities trading venues – both stock exchanges and multilateral trading facilities (MTFs) – had remained largely unchanged for a number of decades since the introduction of electronic trading. Incumbents in the market charged per trade, with pricing based on a percentage of the value of each stock. Margins were high, larger players were dominant, and there was little motivation for change from existing players with vested interests.
There was an opportunity for disruption.
Aquis took this opportunity to develop a subscription model, based on the message traffic companies generate, with various pricing bands to allow additional flexibility.
The first and still the only fee model of its kind in equities trading, the Aquis subscription model helped to grow the market by offering a ‘zero marginal cost’ option for the most frequent users. Additionally, smaller participants were able to benefit from lower fees, instead of needing to qualify for volume discounts, lowering their barrier to entry.
Over the decade since launching Aquis, we have continued to innovate and added a suite of products and trading mechanisms to adapt to changing markets and meet client demand. We introduced periodic auctions – Aquis Auction on Demand – and today run Europe’s largest alternative closing auction, our Market at Close.
We also found that disruption is not just applicable to the broader market, but sometimes to our own views as well – despite launching Aquis as a lit-only market at inception, in 2022 we launched our first dark pool – the Aquis Matching Pool, or AMP – allowing members to trade at the midpoint of the Primary Best Bid and Offer. In introducing AMP, we were reacting to two things: member demand, and broader market conditions – in times of turbulence, lit market volumes tend to decrease in favour of the dark. To adapt, we had to reassess our early model and disrupt – ourselves! AMP remains a successful product in the Aquis Markets suite, and we are looking forward to further growth in coming years.
Looking back on a decade of the Aquis MTF, it is clear disruption has created the opportunity for positive change, and I am glad we have embraced it – ten years on, Aquis remains a provider of high liquidity and best execution. But we didn’t stop there.
As I’m sure all readers of Financial Technologist will know already, it’s hard to create new technology without being disruptive.
We built the infrastructure for Aquis Exchange at a fantastic time – right in the midst of a technological revolution. Technology between 2012 and 2022 was developing at a rate exponential to the several decades preceding.
The technology stack that we built to power the Aquis Exchange was new, and highly performative. Without the heavy tail of decades of data built on legacy systems that others had to deal with, we were using today’s tools to build tomorrow’s markets. As a result, Aquis Exchange was known from early on for one of the lowest latencies in the industry.
In 2015, we created a business division – Aquis Technologies – to ensure we continued to develop and invest in cutting-edge technology. We were a true pioneer in true, fully cloud-based deployments, developing the world’s first cloud-native financial exchange in a proof of concept exercise with the Singapore Stock Exchange and Amazon Web Services (AWS) in 2020, and today we operate Aquis Equinox – the world’s first regulated market grade matching engine which operates 24/7/365 with zero downtime, ever.
An appetite for disruption allowed our David to challenge Goliaths. Our tech no longer sits just at the heart of our own exchange, but of many others around the world.
In 2020, we took this disruption to UK primary listings – purchasing a Recognised Investment Exchange (RIE) license and creating the Aquis Stock Exchange. One of only two licensed equities exchanges in the UK, we had a vision to bring innovation, competition and cutting-edge technology to capital markets.
Capital markets in the UK are in the midst of an existential crisis: large companies are departing for overseas listings at higher ratings; and smaller companies are seeking other measures of funding, due to a perception that the public markets are unwieldy and inaccessible.
It’s time for change. We need a fresh approach, and we need to be bold – unafraid of changing legacy systems and industries.
We have two primary objectives for the Aquis Stock Exchange: to make public markets more accessible and easier to use for more companies, and to make public markets accessible to more investors. We focus our market specifically on growth companies: the small- and medium-sized businesses in desperate need of scale-up capital in order to grow and become tomorrow’s unicorns.
Today, the Aquis Stock Exchange is home to more than 100 growth companies and has helped to raise over £350m. To achieve this, we made regulatory changes to the IPO process: we removed prospectus rules that were overly restrictive for smaller companies; we were more flexible on the accounting infrastructure required (for example, allowing UK GAAP as well as IFRS); and we had a broader criteria for companies considered suitable to IPO - opening the possibility for small but rapidly growing companies who had a shorter track record or required a smaller free float. We also looked at more appropriate rules for companies once on the market – including a slimmed down version of the costly ‘nominated adviser’ role required on other markets, and the removal of class tests for acquisitions, which makes equity funded acquisitions easier.
Aquis Stock Exchange today is the public market home of growth companies, and our next step will be bringing our second objective to the fore: making public markets more accessible to investors – ultimately, getting the public back into public markets.
I have a voracious appetite for disruption – and for Aquis, it’s hard to see how we would be where we are today without it.
As times change, so must business, industry and capital providers. We are in an era of disruption at a scale not seen since the industrial revolution – if our industry doesn’t embrace the opportunities, we risk being left behind.
I’m looking forward to our next phase of disruption – here at Aquis, we’re just getting started!
This article was originally published in The Financial Technologist.