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A short-term focus on financial performance that compromises critical national market infrastructure, a lack of vision, and a defensive culture were among the criticisms levelled at Australia's principal share market operator in an interim report that has triggered a new package of reforms for ASX Limited (ASX: ASX), prompting its shares to plunge to their lowest levels since 2017.
The Australian Securities and Investments Commission (ASIC) claims the reform package, agreed to by the ASX, will strengthen the independence and governance of ASX's clearing and settlement boards.
As part of the package, ASX has also agreed to a strategic reset of transformation program "Accelerate", with clear milestones and accountability for delivery, and will incur a $150 million capital charge to ensure it maintains robust financial resources until remediation is complete.
The announcement has led to a 6.38 per cent drop in ASX's share price to $53.26, representing a $705 million cut to the group's market capitalisation.
The reforms follow an inquiry announced in June this year, led by an expert panel that identified shortcomings in ASX’s governance, capability, risk management and culture that required urgent attention and response.
Its conclusions drew on 140 stakeholder interviews, reviewed written submissions, international benchmarking with similar entities, focus groups with ASX staff, and the review of nearly 10,000 documents.
The report found that while some progress has been made, "more of the same is not an option", describing the scale of transformation required as significant - something that cannot be achieved through "current tactical, incremental measures or business as usual".
It also noted a strategy that lacks the vision necessary for the critical role it plays, supervisory practices that have not achieved the desired outcomes, and governance structures that do not ensure the independence of its clearing and settlement subsidiaries and their required levels of investment.
ASIC chair Joe Longo says urgent action was needed to set 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 says.
"This package is a circuit-breaker."
Longo says the package is about addressing underlying issues, and laying the foundations for a resilient, world-class market operator.
"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," the ASIC chair explains.
"This should be a clear signal to the market that ASX are committed to delivering the transformation necessary for resilient and future-ready national market infrastructure."
The final report of the inquiry is due to be delivered to ASIC by 31 March 2026.
Under the new reforms, directors of the boards of ASX's clearing and settlement (CS) facility licensees are not allowed to also be directors of an ASX group company other than the CS facility licensees.
In addition to ASX’s actions, ASIC and the RBA have also committed to step up their review to uplift the joint supervisory model for the CS facilities.
"ASIC will ensure ASX’s commitments are delivered in full. We are determined to see lasting change that restores trust and confidence in the ASX and the integrity of Australia’s financial markets," Longo adds.
"I want to thank the inquiry panel for their work to date on this comprehensive review, and their help to outline a path to ensuring the ASX delivers the reliable and future-proof market infrastructure Australia needs."
ASX chair David Clarke describes today's agreement as "significant for ASX".
"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," he says.
"The panel has pointed out the need to strengthen leadership and we are committed to doing this at all levels of the organisation to deliver these outcomes.
"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. 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."
ASX managing director and CEO Helen Lofthouse says the reset gives the market operator "further impetus to bring about deep and lasting change".
"These actions should be a clear signal to the market that ASX is committed to delivering the transformation necessary for resilient and future-ready critical market infrastructure," she says.
"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.
"We’re driving that process now and it is clear we will need to lift leadership at all levels to deliver."
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