ASX Inquiry Raises Governance Alarms in Australia Share Market

Highlights

• Corporate regulator initiates a detailed probe into ASX governance and systems

• Repeated breakdowns in CHESS settlement system prompt renewed oversight

• Broader implications flagged across the Australia share market infrastructure

The Australian Securities Exchange (ASX:ASX), which plays a pivotal role in the Australia share market, has come under investigation by the corporate regulator due to longstanding governance and operational failures. The exchange, listed on the All Ordinaries and ASX 100 indices, is being examined for systemic issues involving its critical infrastructure, including the CHESS settlement platform.

The Australian Securities and Investments Commission (ASIC) announced an official inquiry following concerns over persistent breakdowns in the system that underpins trading and settlement across the country’s capital markets.

Failures in Market Infrastructure and Oversight

Key events prompting the inquiry include multiple disruptions in CHESS operations and breaches related to market transparency requirements. The now-defunct blockchain-based upgrade project, which was halted due to various execution challenges, further intensified calls for reform. Regulatory authorities emphasised the need for a stable and modern trading environment, particularly given the ASX’s role in supporting the broader market ecosystem.

The ASX group’s response to these issues has faced criticism over delays in implementing replacement solutions and the effectiveness of its internal governance structures. With increased attention on infrastructure management, the inquiry is set to assess the exchange operator’s frameworks and day-to-day operations.

CHESS Replacement Tied to Regulatory Timelines

Following the abandonment of its blockchain transition, the ASX began developing a new plan to modernise CHESS. This system is responsible for the clearing and settlement of trades across equity and futures markets. The review announced by ASIC will integrate a previous investigation into last year’s outage, consolidating all concerns into one broader governance inquiry.

The regulator has signalled that the ongoing safe operation of ASX systems remains a high priority, especially as the organisation works towards the initial phase of its new CHESS platform. This infrastructure is essential for the functioning of listed markets across indices including ASX 200 and ASX 300.

ASX Group Responds to Governance Inquiry

Acknowledging the seriousness of the situation, ASX leadership expressed full support for the inquiry and openness to recommendations. Company representatives noted that the review offers an external evaluation of current efforts and could guide improvements in governance and system capabilities.

The soon-to-be-formed inquiry panel will be tasked with examining the exchange’s frameworks across governance, capability, and control. The findings are expected to influence both short- and long-term adjustments to how the ASX manages core responsibilities within the Australia share market.

Implications Across Broader Financial Market Operations

Given the ASX’s unique role as the sole provider of equity and futures trading systems in Australia, the outcomes of this investigation carry implications beyond internal management. Every listed company, market participant, and financial institution operating within the All Ordinaries and other major indices depends on ASX infrastructure to facilitate trades.

ASIC’s emphasis on transparency and accountability reflects broader concerns across regulatory bodies regarding the reliability of financial market operators. The ASX’s performance in responding to these challenges is expected to play a key role in shaping the future framework for managing systemic infrastructure within the country.

As the regulatory inquiry unfolds, developments around governance enhancements and controls at ASX will continue to influence sentiment and operational assurance within the Australia share market.