Australian Regulator Flags Risk Management Issues at ASX

The corporate regulator in Australia has issued a final report highlighting significant governance weaknesses and risk management failures at the national market operator, ASX LTD. The findings follow an extensive independent inquiry commissioned by the Australian Securities and Investments Commission (ASIC) to evaluate the exchange's operational standards. The inquiry panel conducted a comprehensive review involving more than 140 interviews with stakeholders and the examination of over 10,000 documents. The investigation also included a technical expert report focused on the CHESS settlement system, which has been a point of contention for the bourse in recent years. According to the regulator, the final report confirms that the exchange operator compromised the resilience of critical market infrastructure in favor of delivering high shareholder returns. The panel concluded that existing governance arrangements failed to prioritize the focus required for essential market systems, noting a lack of aspiration from the operator to act as a proper steward of national infrastructure. Further observations from the panel indicated that risk management and compliance practices at the exchange need to mature and become more deeply integrated into business processes. The report noted that a lack of such integration led to the exchange being overly reactive and tactical when responding to technical incidents and identified operational gaps. ASIC Chair Joe Longo emphasized the necessity of the findings in driving reform within the organization. > The further evidence and key observations in this Final Report support the scale of transformational change required at ASX to deliver on its stewardship of critical market infrastructure. > This report confirms that ASIC’s decision to commission this unprecedented Inquiry was the right call. The release of the final report follows regulatory action taken in December, when ASIC imposed an additional capital charge of A$150 million on the exchange. That measure was a response to recurring issues, including a failed software upgrade and repeated trade-processing glitches that have strained the relationship between the regulator and the market operator since the inquiry was launched in June.