An Australian regulator calls for technology, governance, and corporate culture overhauls at the Australian Stock Exchange.
In the wake of a final “tough” rebuke by the Australian Securities & Investments Commission (ASIC), officials at the Australian Stock Exchange (ASX) say that reforms intended to transform the IT infrastructure, governance, and culture of the company are well underway, facilitating a reset that ASIC says is necessary.
ASIC’s recently released final report found:
- “[The] resilience of critical market infrastructure has been compromised to deliver high shareholder returns;
- Governance arrangements fail to provide the necessary focus on critical market infrastructure;
- ASX lacks the aspiration to be a steward of critical market infrastructure; and
- Capability and cultural barriers are hindering transformational change.”
The ASIC inquiry also cited:
- “ASX’s risk management and compliance practices need to mature to become fit-for-purpose and embedded in business processes. This contributed to ASX being overly reactive and tactical in its response to incidents and identified gaps;” and
- “An area that requires more reflection is the execution of ASX’s own market supervision responsibilities to monitor, supervise and enforce compliance with operating and listing rules by participants and listed entities.”
A series of troubling incidents over the past decade prompted the inquiry:
- “The 2016 hardware failure in ASX’s equity trading system, which delayed the opening of the ASX market and caused it to close early;
- The capacity issue with the CHESS settlement system at the onset of the COVID-19 pandemic in March 2020 required ASIC to direct market participants to reduce trading volumes;
- The November 2020 full-day outage of the ASX equity market due to a failed software upgrade;
- The decision in 2022 to pause and then cancel the upgrade of CHESS, which is now the subject of legal proceedings;
- The failure of the ASX CHESS batch settlement to complete as scheduled on 20 December 2024.”
So, in June 2025, ASIC “took the unprecedented step of commissioning an inquiry into ASX after years of persistent issues and operational failings,” ASIC officials explain. ASIC obtained commitments from ASX “and will closely oversee, along with the Reserve Bank of Australia (RBA), ASX’s implementation of these commitments.”
In a prepared statement, ASX officials say they have been implementing the Commitments Plan, which includes “strengthening governance and enhancing independence of the clearing and settlement facilities, conducting a strategic reset of the Accelerate Program, uplifting leadership capability, and meeting an additional capital charge of $150 million imposed by ASIC. The reset of the Accelerate Program must be agreed with ASIC and the RBA by 30 June 2026.”
The Accelerate Program was “initiated by ASX to deliver improvements across risk, business and technology resilience, cyber risk, data management as well as culture and capabilities,” ASIC notes.
One of the key commitments for ASX officials is to strengthen the governance and independence of their Clearing and Settlement Facility (CS) Boards: “ASIC notes that progress has been made since December, as the CS Facility Boards are now comprised solely of independent directors following the resignation of three ASX Limited directors from the CS Facility Boards in February 2026,” according to the regulator.
ASX officials have also identified and appointed “additional directors who have the right skills, as well as a new CS managing director,” ASIC officials say. “ASX is progressing steps to achieve greater functional separation of the CS facilities from other businesses.”
The panel’s final report “is tough reading. It provides a critical lens on where ASX has fallen short and why fundamental changes are required,” says David Clarke, chair of ASX, in a prepared statement. “The panel also found a culture that has become defensive and insular, where we don’t spend enough time looking outward. That is not how we shape and steward the exchange of the future. Changing culture is harder than changing structures, and it takes longer, but it starts with recognizing where we are and what must change.”
ASIC’s actions underscore the key role that regulators play in guaranteeing that financial market infrastructures (FMIs) are functioning efficiently and contributing to the stability of the global financial system. While there are new regimes at the SEC and CFTC expressing rhetoric more sympathetic toward those they regulate, FMIs remain under intense scrutiny.
“All regulators take these matters seriously,” Virginie O’Shea, founder of market research firm Firebrand Research, tells FTF News. “The failure of an FMI would result in a potentially serious impact in the trust and confidence in a market, as well as direct financial losses. The systemic importance of good governance and operational resilience is hammered home regularly by IOSCO [International Organization of Securities Commissions], of which the CFTC and SEC are members.”
The ASX situation also reminds the shareholders, customers, and partners of FMIs that they have leverage when FMIs deliver less than optimal services and support.
“Financial institutions can make official complaints to the designated regulator in charge of monitoring and regulating their domestic FMIs,” O’Shea says. “Sometimes that is the prudential regulator, as in the U.K., where it is the PRA [Prudential Regulation Authority], and sometimes it is the markets regulator, as in Australia, where it is ASIC.”
In general, “a complaint will result in an investigation by the regulator into the market practices of the FMI and the cause of the complaint. Most often this is non-public and takes place behind closed doors,” O’Shea notes. “If there is cause for further action determined by the regulator, this can either proceed to a more public investigation or a warning by the regulator to the FMI to rectify its shortcomings. Much of this work isn’t public, and it only tends to become so if the FMI in question fails to heed repeated warnings from the regulator. Public instances are relatively few and far between, so it could be determined that the private warnings are often successful.”
The very public ASIC report concludes that “for ASX to fulfill its stewardship role in Australia’s financial markets, it must undertake a fundamental reset. ASX is now at an important inflection point.”
One of the first tests of the ASX’s reset “includes the safe transition of the CHESS [Clearing House Electronic Subregister System] Replacement Release One, which is currently scheduled for go-live in late April 2026,” according to ASIC. “CHESS is another well-publicized example of aging technology. After its initial attempt to replace CHESS using distributed ledger technology (DLT) between 2017 and 2022, ASX is now planning to upgrade this critical system over two releases in April 2026 and 2029.”
The ASIC report can be found here: https://shorturl.at/5pio5
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