ASX hit with conditions amid outage fallout

The ASX will have to strengthen its governance following ASIC’s investigation into a major trading outage that forced the exchange to shut down for a day in November last year. 

The corporate watchdog today concluded its investigation into the ASX outage, which occurred on November 16, 2020 shortly after an upgrade to the ASX’s equity trading platform just after the market opened.

ASIC said it found “serious deficiencies” in the exchange’s ability to limit the impact on liquidity highlighted by the outage, despite some of these deficiencies having previously been raised by ASIC.

“The ASX outage was a very serious event, exacerbated by subsequent operational issues,” ASIC chair Joe Longo said.

“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.”

The new programme is due to go live in April 2023.

The new conditions on the ASX’s Australian market licence require remediation of underlying issues with ASX operations that led to the outage.

In addition, the conditions are designed to assign accountability to the ASX board and its senior executives.

The ASX will also be expected to bring on an independent expert to assess whether the ASX’s assurance programme to replace the CHESS system is fit for purpose.

ASX managing director Dominic Stevens said he was pleased that ASIC’s investigation had closed and that no breach had been found.

“The new licence conditions are practical and are aligned with the action ASX is taking to improve the way we operate our business,” he said in a statement.

“We are addressing each of the recommendations made in the report into the market outage and will appoint an independent expert to review our actions to meet the recommendations.”