ASX fined $1.05M following 8,417 market integrity rule violations

March 07, 2024 01:22 PM AEDT | By Investing

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ASX fined $1.05M following 8,417 market integrity rule violations

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Investing.com - The Australian Securities and Investments Commission (ASIC) has accused the Australian Securities Exchange (ASX) of breaching market integrity rules over 8,000 times from April 2019 to December 2022. This marks the first instance of ASIC issuing a notice to a market operator, with ASX having paid a $1.05 million fine for the breaches.

ASIC's findings point towards "serious" misconduct in the configuration of ASX's internal trading systems. ASX executives Damian Roche and Helen Lofthouse, already under scrutiny for a botched implementation of the exchange's clearing system, are facing increased pressure.

ASIC's allegations refer to a configuration error in the block trade minimum threshold for a subset of exchange-traded funds and warrants. The issue, unrelated to the CHESS system, has been described as an "order information transparency failure" by ASIC.

The regulator emphasizes that the ASX failed to provide necessary information about orders for certain equity market products due to the system configuration error. The importance of pre-trade information lies in its role in price formation, liquidity provision, and investment opportunity evaluation.

The issue adds to the governance questions surrounding ASX Chairman Damian Roche, who has been on the ASX board since 2014 and ascended to the chairman role in 2021. The issue remained undetected until brought to ASX's attention by a market participant, and ASIC states that on at least two occasions before December 2022, ASX could have identified the problem but did not.

ASIC is also investigating whether ASX and its directors breached legal obligations during the failed CHESS replacement project, including duties to act with care and diligence and keep the market fully informed.

The ASX is also under political scrutiny after new laws were passed last September, opening its clearing and settlement functions to greater competition. ASIC continues to prioritize technology and operational resilience for market operators and is committed to ensuring robust systems, controls, and technological infrastructure for Australia's capital markets.

This article first appeared in Investing.com

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