Australia’s big bourse agrees to regulator’s medicine
Australia’s stock exchange operator will be forced to raise another $150 million in capital after an expert panel found deficiencies in its governance, risk management and culture.
The local stock exchange, which has a market capitalization of $11 billion, also agreed to a series of reforms as part of a settlement with the Australian Securities and Investments Commission on Monday.
Following a series of embarrassing events for the exchange, including a payment failure caused by a decades-old coding error, an investigation was launched on December 20, 2024.
More recently, on December 1, a technical glitch prevented dozens of stocks from trading for hours after the market news service went out.
Commission chairman Joe Longo said the urgent action recommended in the expert panel’s interim report was needed to put the ASX on the right track.
“The ASX needs to embrace a new era of accountability, investment and governance to boost 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 require time and resources to fix.
“This reset is about addressing the 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 jeopardized its obligations to operate critical national market infrastructure.
Its strategy also lacked the vision necessary for the critical role it played, and its culture was defensive, limiting its ability to deliver meaningful change.
Under the agreement with the commission, the ASX must raise the additional capital by 30 June 2027 and hold it until milestones set in the reset program are met and ASIC approves its release.
As part of the agreement, the ASX agreed that the boards governing four of its clearing and clearing functions will consist only of independent directors who are not part of ASX Limited.
ASX chairman David Clarke said: “While the panel’s report may be difficult to read, our commitment to strategic action will provide the reset needed to ensure the ASX delivers a resilient market infrastructure for Australia.” he said.
ASX chief executive Helen Lofthouse said there was “no doubt” the report’s findings were difficult, but the ASX agreed on the need for transformation 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 now needs to take urgent action to correct them, in line with its commitments to regulators,” he said.
The investigation’s final report is due to be delivered by ASIC by March 31, but Ms Lofthouse said Monday’s report contained important recommendations.
The ASX now plans to raise additional capital by reducing its dividend payout ratio over the next few years.
Heading into midday, ASX shares were down almost three per cent at $55.27 after reaching $54.84, the lowest since a brief dip in October 2023.
