Australian Securities Exchange (ASX) will have to “reset” its transformation program and hold onto additional capital until it rebuilds its technological and organisational resilience.
An interim report [pdf] from an inquiry into the market operator’s resilience problems offers a damning assessment of the company, finding it unambitious, without internal appetite to innovate, and suffering from years of underinvestment in critical areas, such as its technology systems and people.
ASX chair David Clarke called the interim report “challenging reading” – but said the market operator was committed to “deliver resilient market infrastructure for Australia.”
The interim report alleges ASX let shareholder interests dictate decision-making at the expense of almost everything else.
“Until recently, ASX’s operational and capital expenditure has been low, leading to under-investment in technology, systems, processes, and its own people over a number of years,” the report states.
“ASX has now fallen behind with challenges faced across many areas of ASX’s business.
“These include deferred upgrades to technology platforms, under-investment in core capabilities, lack of action in response to customer feedback, and the need to continue improving its business continuity and contingency arrangements.”
The interim report recommends that ASX challenge itself more when it comes to service delivery and underlying infrastructure.
“In the panel’s view, ASX continues to underestimate the full extent of change required to successfully perform its important stewardship role,” it wrote.
“While attempts have been made to improve practices over time, these have often been more focused on closing gaps rather than striving for excellence.
“ASX has underappreciated the long-term investment required to act as the steward for Australia’s critical market infrastructure, nor has it undertaken sufficient root cause analysis to focus remediation efforts most effectively.”
The firefighting – rather than long-term – focus may be a product of the pressure ASX has been under, the report stated.
Since the start of 2020, ASX has “been subject to over 120 reports from external parties to review and/or improve aspects of its governance, capability, culture and risk management,” the report stated.
These were commissioned both by regulators and ASX itself, largely from external consultancies.
“As a consequence, ASX has become overwhelmed,” the report states.
“The scope of some of this work has been poorly targeted and ill-defined. This has resulted in outcomes that are far from what stakeholders had intended.”
The inquiry was launched in June this year following five key technology system “incidents” in the past decade.
ASX will have to, among other things, hold $150 million in capital and revamp its ‘Accelerate’ program to identify and fix gaps in its resilience.
The exchange said it would “accumulate the additional capital” by mid-2027.