The Australian Securities and Investments Commission (ASIC) has initiated a comprehensive investigation into the Australian Securities Exchange (ASX) due to what it perceives as significant and recurring deficiencies. The inquiry will focus on evaluating the ASX’s risk management, operational capabilities, and governance standards, particularly concerning its role as a vital market infrastructure.
ASIC’s scrutiny will delve into a series of technical breakdowns, which the regulatory body suspects may stem from broader governance challenges within the ASX. Of particular interest is the problematic upgrade of the ASX’s CHESS settlement system, a crucial component for recording shareholding investments and managing share transactions.
While ASIC has terminated its prior examination related to the December 2024 CHESS Batch Settlement Incident, this occurrence will now be integrated into the broader investigation unveiled recently. The ASX’s pivotal position in facilitating transactions within the Australian equities and futures markets underscores the importance of ensuring its operational soundness and reliability.
Joe Longo, the chair of ASIC, emphasized the necessity for market participants to have unwavering trust in the ASX’s operations. Longo highlighted the critical role played by the ASX in the country’s financial landscape and stressed the significance of rectifying the identified shortcomings to reinforce market confidence.
As part of the review process, ASIC will assemble an expert panel to provide insights, with updates on the inquiry expected in the near future. However, a specific timeline for the inquiry’s completion has not been outlined yet, indicating the complexity and depth of the investigation.
In response to ASIC’s inquiry, ASX chairman David Clarke acknowledged the need for improvements and expressed openness to external evaluations to enhance the exchange’s culture, operational risk management, and technological resilience. Clarke recognized the incidents that have eroded trust in the ASX and welcomed the opportunity for independent assessments to identify areas for enhancement.
The ASX’s ongoing efforts to implement a transformation strategy aimed at fortifying its operations and resilience have been overshadowed by recent lapses, necessitating a critical appraisal of its systems and practices. The collaboration with external parties for an impartial evaluation signifies the ASX’s commitment to addressing deficiencies and rebuilding trust within the market.
Amidst the evolving regulatory landscape and increasing scrutiny on financial institutions’ governance and risk management practices, ASIC’s probe into the ASX underscores the imperative for robust oversight and accountability within the securities market. The outcomes of this investigation are anticipated to have far-reaching implications for market participants, investors, and regulatory authorities, shaping the future trajectory of Australia’s financial ecosystem.
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