By DAVID MYTON
It takes one thing to transform a good idea into a great idea, says Professor Mike Aitken AM – and that’s implementation. You have to take that good idea and make it work, to ensure it does all those things you claimed and hoped it would.
Aitken should know. Right now, this minute, a troupe of Aitken-conceived technologies is doing what was claimed on the tin: making financial markets better by making them transparent, fair and efficient and in the process facilitating evidence-based policy making.
Aitken, an acclaimed and award-winning academic with a flair for breakthrough invention and entrepreneurship, has now turned his attention to another area he believes is in need of a transformative great idea – health.
“Financial markets and health systems seem sort of far apart. But are they as far apart as we think? Is there something that connects these two things?,” says Aitken, Chief Scientist of the RoZetta Institute (formerly CMCRC), winner of the 2016 Prime Minister’s prize for Innovation in Science, and a world-leading expert in security market microstructure and design.
“I think there is. Fundamentally it’s data. However, as an investor in financial markets you can go to an exchange, and you can see all the stocks. You can see what its price is, and you can be very confident that those prices reflect all available information, such that you’re not going to get done over.
“The point is, that’s exactly what you don’t have in health markets.”
New system ‘a kind of an exchange mechanism’
Aitken – whose other laurels include the Business and Higher Education Round Table Award for Outstanding Achievement in Collaboration in Education and Training, the Ernst and Young ICT Entrepreneur of the Year, as well as NSW and Prime Minister Exporter of the Year – is proposing a system called Suture in which all the providers are available via “a kind of an exchange mechanism, and you can pick and choose between them based on price and quality”.
Suture will identify, for example, surgeons within a given area, their experience and specialty, fees, and postoperative complications rate.
“Now all of that data exists already, it’s just not available to us. What I’m trying to do is find a way that you and I, our brokers, private health insurers, and the government, can access that information to make more effective decisions about our health.”
And it can be done while ensuring the privacy of the individual, he says.
“We’ve dealt with all this in the financial markets. Why can’t we deal with it in health too?
“It can be done. We have technology at our disposal these days, through one of our partner companies called Haventec which allows secure communications.”
‘I needed to do things differently’
After taking out first class honours and masters degrees from Massey University in his native New Zealand, Aitken headed for Australia where he undertook a PhD at the University of New South Wales.
He was ambitious and wanted to succeed at the highest level.
“I saw right from the start that to work effectively in a university, you need to differentiate yourself. I immediately knew that if I was to get to the top in academia, I needed to do things differently,” he says.
He observed that in finance-business there was little cooperation between academics.
“Everyone was trying to do everything one-on-one. If I was writing a paper, it was just me. And I looked at the physical sciences, and there were say 10, 12 people all working on the same paper. That’s a much smarter move, for a whole lot of reasons.
“I thought to myself, I need to be the head of a lab where I’ve got lots of people helping me to actually do what I need to get done. It’s all about cooperation.”
The business-finance discipline was bringing in money, but received little research funding.
“We are the cash cows of the university, we make all the money, but all the money gets transferred to the guys who do all the research. And we can’t do any research because basically we’ve got student staff ratios of 35 and 50 to 1. And it was like a never-ending circle of despair for us.”
Aitken pondered on how to fix this.
“We didn’t have any infrastructure to do research. We didn’t have central databases, we didn’t have central computer systems and all the rest of it, so I just said – ‘Here’s my one bit of inspiration. I wonder if I can convince the universities to get together to share a single infrastructure’.”
He identified what he deemed to be a good model – the Australian Institute for Nuclear Science and Engineering (AINSE).
“They share one infrastructure, the Lucas Heights Nuclear Reactor. I thought ‘well that’s a smart move – ‘Why can’t we in business share one infrastructure across the whole group?’”
Assuring market fairness and quality
And so in 1997 was born the Securities Industry Research Centre of Asia Pacific, or SIRCA, which by 2003 had developed into the CMCRC with its mission of assuring market quality.
“SIRCA was set up as a single infrastructure to actually underlie all our research and development,” says Aitken. “This was probably the first time where we saw multiple universities getting together to actually share one infrastructure. It was a very sensible thing to be doing.”
It worked. “When I then went to the government for infrastructure grants, I had multiple universities supporting me. Until that time, they would just give grants to individual universities. Now we had this concept of sharing infrastructure across the entities.”
Previously, he says, the bigger universities were always at an advantage.
“Because they had more money, they could buy more infrastructure, and so they could get better people.
“When I put in place SIRCA, it didn’t matter which university a researcher was at.
Everyone had equitable access to the technology, and then it was all about competing on brainpower.”
The move paid off, underpinning an incredible flow of creativity and invention destined to bring forth a new model of PhD education as well as a set of technologies that would help to assure quality and fairness in the world’s financial markets and beyond.
Huge boxes of magnetic tapes
As SIRCA grew into a kind of “meta university” with some 15-20 universities enlisting to its cause, Aitken travelled the world on a quest for financial market data that could be fed into the new infrastructure.
A meeting with Herbie Skeete, then at Thomson Reuters, led to Aitken gaining access to Thomson Reuters data. And this wasn’t data encased in a tiny flash drive.
“In those days – 20-25 years ago – the data was so big that it had to be shipped in huge boxes of magnetic tapes. We took it off those magnetic tapes and stored it, and put it onto these computers that we were building.”
Out of this grew the breakthrough Thomson Reuters Tick History Service, which ingests more than two million transactions a second from the world’s financial markets “and makes it available to the commercial and academic enterprise, with the former funding the later”.
He also led the way in developing the SMARTS Group, utilising technology that delivers real time market surveillance, market supervision and compliance, and which was sold to NASDAQ-OMX in 2010.
Holding firm to the spirit of the entrepreneur, Aitken ploughed some of the funds from the sale into establishing Capital Market Technologies (CMT), with a mission to invest in start-up enterprises in a range of markets.
Then followed pioneering work on two more technologies designed to monitor and measure market quality, fairness and efficiency – the Market Quality Framework and the Market Quality Dashboard.
He’s now turning is eye to another field – energy markets. “Nobody really knows much about these markets,” he says, “so we’re working on creating a surveillance system and ultimately to develop a Market Quality Dashboard – Energy.”
“Eventually we’ll be able to look at every time there’s a change in the way the market operates, and how it affects the quality of that marketplace.”
On top of all this, Aitken heads an expert witness business – Capital Markets Consulting – providing specialist services for legal cases involving insider trading, market manipulation and continuous disclosure breaches. He was also a key force behind a recoveries practice in the health domain.
Focusing on problems that industry want solved
From its early days as SIRCA and then as CMCRC to the RoZetta Institute today, Aitken has been keen to have PhD students involved in the organisation’s research, eventually establishing a formal Industrial PhD program.
In his view, not every PhD student needs to be doing “blue sky” research and looking for a career in a university.
“I want to train these students in all of these sort of practical techniques. And I want them going into industry. Ultimately some of them will go back to university, but about 70 per cent go into the real world with first hand experience of what we do.
“How many industry people actually support PhD students out of university? Very few.
“They might buy a chair or something like that, if they’ve made a lot of money this year, but supporting an individual PhD student at a university to do their PhD – that’s not something that they do a lot of.
“And that’s what we’ve managed to do – to actually come up with a model that has individual industry people funding PhD students.”
Candidates spend time with an industry partner, applying their knowledge and developing new skills.
“Most of our people get a job instantaneously on graduation. They take on industry relevant positions, solve industry relevant questions.
“Most of the stuff that we do at university is blue sky. There’s nothing wrong with doing blue sky research, but there’s also nothing wrong with focusing on problems that industry want solved.”
The Industrial PhD student gets real world experience working with industry, and industry benefits from their research insights.
“And our PhDs are paid … We pay them $50,000 tax free, and if they go overseas, they get paid an extra $20,000 to go and live somewhere else in the word for six months. What a cool system that is. Right?”
Evidence-based policy making
Aitken is relentless in his quest to ensure fair and efficient markets, be they financial, health or energy. His work, he says, “is an attempt basically to facilitate evidence-based policy making”.
“If you want a proper functioning marketplace, you need to constantly look at changes that are taking place, and try to understand how those changes affect the market quality.
“If you don’t do that, then basically anything could happen. The market could collapse at any time, and you won’t know why.”
He defines a fair market as one that minimises the extent to which market participants engage in prohibited trading behaviours.
“When I did that, I figured out that there are three key prohibited trading behaviours – insider trading, market manipulation, and front-running. And guess what?
“They’re the three things that are the centre of a surveillance system. And so I built a surveillance system for financial markets. And that turned me into an entrepreneur accidentally. I thank god for a healthy dose of good fortune and never look backwards.”