In the face of a review that raised concerns about Australia’s primary securities exchange, ASX Group, prioritizing shareholder returns over the provision of critical market infrastructure, the Australian Securities and Investments Commission (ASIC) announced a series of agreed-upon reforms that aim to shore up confidence in the country’s financial markets.
The regulator released an interim report from an expert panel that was charged with reviewing the ASX. The report identified a series of issues with the exchange’s “governance, capability, risk management and culture that required urgent attention and response.”
Among other things, it found that, “the ASX’s focus on short-term financial performance and shareholder returns has compromised its obligations to operate critical national market infrastructure.”
This focus on shareholder returns resulted in the company under-investing in both technology and its people, the report said. As a result, it found that the exchange has “fallen behind with challenges faced across many areas of ASX’s business,” including overdue tech upgrades, failing to address customer complaints and not adequately investing in the business in order to keep costs down and shareholder returns high.
“Despite ASX taking steps to increase its investment in recent years, it is not sufficient to close the gap nor address the evolving demands of the market,” the report said. “Shareholder expectations of ASX’s future profitability and expenditure remain heavily anchored around past performance and returns. This creates a real and unresolved tension between ASX’s shareholders, its customers and regulators.”
The review also concluded that the exchange’s culture is “defensive”, that its strategy “lacks the vision necessary for the critical role it plays”, and that its existing efforts to improve haven’t worked.
To address these concerns, the ASIC and ASX agreed to series of reforms, along with the imposition of A$150-million capital change on ASX Ltd. to ensure that the company has the financial resources to carry out the planned reforms. Those changes include measures to strengthen the independence of the boards of its clearing and settlement units, the introduction of new deadlines for an ongoing technology overhaul and a pledge of stronger leadership.
“The scale of transformation required [at the ASX] is significant and cannot be achieved through current tactical, incremental measures or business as usual,” the report said — and so, the ASIC is seeking drastic action.
“The package will strengthen confidence in ASX and Australia’s critical market infrastructure, provides certainty about the market operator’s reset and responds to the interim report,” the ASIC said in a release.
“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,” said ASIC chair, Joe Longo, in a statement.
“Many of the problems the report identifies took years to develop, and while there are some immediate actions that will be put in place, the key issues are going to take time and resources to resolve. There are no quick fixes or shortcuts,” he said. “This reset is about addressing underlying issues, and laying the foundations for a resilient, world-class market operator.”
Longo said that the ASIC will ensure that the ASX fully delivers on its commitments.
“We are determined to see lasting change that restores trust and confidence in the ASX and the integrity of Australia’s financial markets,” he said.
“There is no doubt this is a tough report. It has placed ASX under a critical lens and the assessment from the panel is that we must get better,” said Helen Lofthouse, managing director and CEO of the ASX, in a release.
“We are aligned with the report on the need to transform and that has been the driving force behind our strategy, including our significant investment in technology modernization. This reset gives us further impetus to bring about deep and lasting change,” she added.
“Addressing the findings in the panel’s interim report and successfully implementing the strategic package of actions is the highest priority for board and management,” added ASX chair, David Clarke. “Demonstrating diligent and disciplined execution is what will build confidence in ASX and we must earn the right each day to be the respected stewards of critical market infrastructure.”
The final report from the expert panel is due March 31, 2026.