Australia’s share market operator has been warned to get its act together by the Reserve Bank in a scathing report amid the bungled update of its trading settlement system.
The ASX had “considerable work to do” to meet the central bank’s expectations, the RBA said as it released a report into the operator’s clearing and settlement facilities on Wednesday.
As the agency overseeing these facilities in Australia, the RBA threatened to take further action if the ASX didn’t make foundational changes to its governance, culture and risk management processes.
“ASX is not currently meeting the regulators’ expectations for an operator of critical national infrastructure. Resilient and secure (clearance and settlement) facilities are crucial to the stability of the Australian financial system,” said assistant governor Brad Jones.
“This assessment highlights that ASX still has more work to do to in strengthening its governance, risk culture, and frameworks for managing operational and financial risk.
“We are expecting meaningful progress over the coming year and will consider further regulatory responses if necessary.”
A litany of failings by the market operator in recent years has put it in the crosshairs of the RBA and corporate regulator the Australian Securities and Investments Commission.
The ASX is also the subject of an ongoing ASIC inquiry into its delayed attempts to upgrade its decades-old CHESS clearing and settlement system, including a botched plan to replace it with blockchain technology.
It’s ageing technology assets have been hit by a number of high-profile outages in recent years, including a failure last December that left traders unable to settle trades on the Friday before Christmas.
ASX chairman David Clarke said the group’s boards had heard the RBA concerns clearly, particularly around risk management.
“We have achieved notable improvements under the group’s five-year transformation strategy, but it is essential we continue to apply appropriate rigour across all facets of our operations,” he said in a statement.
“We have a strong imperative to act with urgency, and we must do this while balancing risks in a complex environment.”
ASX’s share price had fallen by about one per cent on the market it operates by Wednesday afternoon.
The share price is down by more than 36 per cent from its peak in November 2021.
