‘Serious failures': ASIC launch ASX investigation
The corporate watchdog ASIC has launched an investigation into the Australian Securities Exchange following 'repeated and serious failures' in maintaining the infrastructure critical to equities trading.
The inquiry will examine a series of technology failures at the ASX, primarily related to its troubled upgrade of the CHESS settlement system, which manages the settlement of share transactions and records shareholdings.
ASIC and the Reserve Bank voiced deep concerns in December 2024 when the CHESS system failed to complete a settlement run.
'ASIC's decision to initiate an inquiry follows repeated and serious failures at ASX,' chair Joe Longo said.
'ASX is ubiquitous — you simply cannot buy and settle on Australia's public equities and futures markets without relying on ASX and its systems.
'The inquiry provides an opportunity for ASX to bolster market trust.'
ASIC will convene an expert panel to review the ASX Group's organisational structure, board governance, risk and compliance frameworks, financial objectives, and its mix of monopoly and competitive services. The panel will also examine how the organisation identifies and responds to concerns raised by staff, regulators and market participants.
The panel, which would include representatives of the RBA, APRA and the ACCC, will consider whether current reform initiatives underway at the ASX are adequate and, if not, recommend remedial actions. A final report will be delivered to ASIC at a date to be agreed.
ASX Chairman David Clarke said the firm acknowledged the seriousness of the action, and would give the inquiry its full cooperation.
'We have been working hard on a transformation strategy with several of the initiatives designed to strengthen culture and capabilities, operational risk management, business resilience and technology resilience, but we acknowledge there have been incidents that have damaged trust in ASX,' he said.
'We welcome the opportunity for independent parties to review the work underway and advise on what more we can do.'
The ASX is midway through a five-year technology modernisation program that includes maintaining the existing CHESS platform, introduced in 1994, while building a blockchain-based replacement.
The initial attempt to upgrade CHESS was plagued by delays and problems, resulting in pre-tax write downs of $250 million about three years ago. The project was ultimately scrapped in late 2022, shortly after Helen Lofthouse became ASX chief executive.
The failure to implement a new system had put the ASX in the sights of a class action suit that would target former ASX executives, management and potentially board members, according to a recent report in the Australian Financial Review.
ASIC will discontinue its separate investigation into the 20 December 2024 CHESS batch settlement failure, with the incident instead to be considered as part of the broader Inquiry, alongside a series of other failures dating back to 2016, including a hardware fault that delayed the market opening and forced an early closure that year. Other issues included capacity constraints during the COVID-19 volatility in March 2020, a full-day outage caused by a failed software upgrade in November 2020, and the abandonment of the original CHESS replacement project in 2022, which is now the subject of legal proceedings.
Meanwhile, ASX has announced the departure of Group Executive Listings Blair Beaton, who leaves following an extended period of personal leave.
Mr Beaton, who joined the exchange in 2017 as Chief Strategy Officer and became head of Listings in August 2022, was praised by CEO Helen Lofthouse for his 'dedication, diligence and enthusiasm' and his advocacy for ASX as the nation's premier listings venue.
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