ASIC imposes major conditions on ASX, stops short of breach

The Australian Securities and Investment Commission has imposed serious licence conditions on both the ASX and its senior management as a sanction for an outage that caused severe market disruption last November, putting in place a range of measures to ensure that the crucial CHESS replacement is better-managed.

“The ASX outage was a very serious event, exacerbated by subsequent operational issues. The imposition of these licence conditions will confirm that remedial actions are implemented appropriately and efficiently to address these operational issues – including for the critical rollout of the CHESS Replacement Program,” said ASIC chairman Joe Longo.

The conditions involve appointing an independent expert to assess the remediation agenda, appointing an independent expert to assess ASX’s assurance program for the implementation of the CHESS replacement program and, while the program is ongoing, requiring attestations from senior executives and the Board about technology project readiness.

ASX CEO Dominic Stevens said work to meet the new conditions is already underway saying, “where relevant we are applying lessons from the outage to CHESS replacement.“

The long-awaited CHESS replacement, which will utilise distributed ledger technology or blockchain for clearing, is due in 2023.

ASIC’s investigation into the outage concluded almost a year to the date of the November 16 incident also concluded that brokers did not have in place appropriate measures to conduct trades via ASX’s main competitor, Chi-X.

While ASIC has imposed major conditions on ASX, it stopped short of determining that the market operator had breached its licence obligations.

“ASIC’s actions today are all about ensuring the efficient and effective future operation of Australia’s financial markets infrastructure. ASX and market participants must act to ensure that the market can function at all times, so that vital sources of capital are available to the economy,” said Mr Longo.

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