‘Deeply disappointed’: ASX cops corporate watchdog and central bank lashing for inaction over trade bungle

Australia’s corporate watchdog and central bank have scolded the Australian Securities Exchange over “deep concerns” for its reliability as a trading house and for taking too long to fix incident-prone systems.

A joint letter penned to the ASX Ltd board by Reserve Bank of Australia governor Michele Bullock and Australian Securities and Investments Commission chair Joe Longo said they were “deeply disappointed” with the country’s dominant securities trading exchange.

The stern letter sent on Friday follows an outage on the ASX’s Clearing House Electronic Subregister System (CHESS) in December that left share traders unable to settle buy and sell orders for a day.

“For some time, the regulators have been raising serious concerns about operational risk at the ASX clearing and settlement facilities. These risks were realised in this major operational incident,” the letter read.

The pair said the incident and the ASX’s response was evidence the pace of change was “too slow”.

As part of the lashing, the RBA has downgraded its ranking of the ASX’s operational risk standard from “partly” to “not” observed. The RBA has also vowed to audit the group’s compliance outside of the usual assessment cycle.

ASIC is demanding the ASX bring in an approved external expert to deliver a “technical review” of the under-fire CHESS system.

The ASX first announced it would look to replace CHESS back in 2016, and originally set a target of April 2021 to have the project working.

Another target of 2023 has been and gone, and now the exchange is working towards a deadline of April 2026 for the first replacement project rollout.

But the RBA and ASIC are concerned about how reliably CHESS can deliver until the system is fully refurbished by 2029.

And ASIC has already sued the ASX for allegedly misleading conduct over the delayed development of a replacement system.

The corporate enforcer warned on Monday there could be further regulatory action if the ASX didn’t prioritise immediately fixing the issues that caused the recent disruption.

It also referenced new laws that passed Parliament in 2024 under which the RBA could lean on “crisis resolution powers” to place a clearing and settlement facility, such as CHESS, under statutory management.

Responding to the letter, ASX chair David Clarke said the settlement incident was “very serious” and the board and directors were “highly engaged on the matter”.

“We understand how disappointing it was and we are absolutely committed to rebuilding confidence in ASX.

But he acknowledged that more needed to be done and the group “must act with greater urgency”.

The RBA, ASIC and ASX boards are due to meet in the coming weeks.