Australia’s stock exchange operator will have to hold an additional $150 million in capital after an expert panel found failings in its governance, risk management and culture.
The local securities exchange, which has a market value of $11 billion, has also agreed to a series of reforms as part of an agreement with the Australian Securities and Investments Commission revealed on Monday.
An inquiry began after a series of embarrassing events for the bourse, including a December 20, 2024, settlement failure caused by a decades-old coding error.
More recently, on December 1, a technical failure prevented dozens of stocks from trading for hours after an outage of its market news service.
Commission chairman Joe Longo said urgent action recommended in the expert panel’s interim report was needed to set the ASX on the right path.
“ASX needs to embrace a new era of accountability, investment, and stewardship to increase confidence and meet the expectations of the market and the Australian public,” he said.
“This package is a circuit-breaker.”
Many of the problems identified in the independent expert report took years to develop and will also take time and resources to fix.
“This reset is about addressing underlying issues, and laying the foundations for a resilient, world-class market operator,” Mr Longo said.
The expert panel was chaired by former Westpac executive Rob Whitfield and included Team Global Express chief executive Christine Holman and economist Guy Debelle.
It concluded that the ASX’s focus on short-term financial performance and shareholder returns had compromised its obligations to operate critical national market infrastructure.
Its strategy also lacked the vision necessary for the critical role it plays, and its culture was defensive and limited its ability to deliver meaningful change.
Under the agreement with the commission, the ASX is required to accumulate the additional capital by June 30, 2027, and hold it until milestones identified in the reset program are met and ASIC approves its release.
As part of the agreement, the ASX has agreed that boards that govern four of its settlement and clearing functions will be comprised of only independent directors who are not part of ASX Limited.
“While the panel’s report was challenging reading, our commitment to the strategic actions will provide the reset needed for ASX to ensure we deliver resilient market infrastructure for Australia,” ASX chair David Clarke said.
ASX chief executive Helen Lofthouse said there was “no doubt” the report findings were tough, but the ASX agreed with the need to transform and was committed to delivering critical market infrastructure.
Federal Treasurer Jim Chalmers welcomed the agreement between the commission and the ASX, saying the issue was urgent.
“The report raises very serious issues and the ASX must now act urgently to fix them, consistent with the commitments it has given to the regulators,” he said.
The final report of the inquiry is due to be delivered by ASIC by March 31, although Ms Lofthouse noted substantive recommendations were contained in Monday’s report.
The ASX now plans to raise the additional capital by cutting its dividend payout ratio over the next few years.
Heading toward midday, ASX shares were down almost three per cent to $55.27 after earlier hitting $54.84, which was the lowest level since a brief dip in October 2023.
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