After yet another blunder on Monday – this time an announcements outage – the boutique investment manager has said the ASX urgently needs to embark on a years-long transformation.
Speaking at a media briefing on 2 December, Jun Bei Liu, Ten Cap’s founder and lead portfolio manager, had some advice for the Australian Securities Exchange (ASX).
Ten Cap recently worked with the exchange for the listing of its Ten Cap Alpha Plus Complex ETF last month.
“They need to resolve their issues with ASIC [Australian Securities & Investment Commission], and then they can move on,
“I think they need to admit the mistake, move on, and then reinvest in the business, like proper reinvestment into the business to change the culture. It might take a three-year transformation, but they need to do that,” Liu said.
Her comments follow the exchange’s recent announcements outage and broader sector weakness, which disrupted 80 companies and rattled investors at the start of December.
It was not until 6.45pm that the ASX said it had “largely resolved” the problem, around nine hours after the initial outage, and it was still working through non-price sensitive announcements lodged prior to 11.22am.
In a statement, one of three issued during the outage, it said: “Of those issuers affected, ASX thanks those who resubmitted their announcement to be processed. Any issuer who has yet to have their announcement published should resubmit if they haven’t already done so.
“We recognise that this event has been highly disruptive for some companies and we apologise to those impacted from today’s issue.”
The outage was the latest in a string of compliance and operational failures that have drawn heightened regulatory scrutiny for the ASX, including a probe launched by the corporate regulator in June over its CHESS project.
In August, it incorrectly tagged TPG Telecom in a price-sensitive announcement about a $645 million takeover deal for Infomedia, accidentally wiping $400 million from TPG’s share price.
“I feel sorry for them,” Liu said, noting that while the firm had recently increased its capital expenditure, it still needed to be paired with a clearer vision for where the exchange was headed.
“There’s just a lingering effect of the under-investment for so many years, because there was not much competition, it’s been a monopolistic thing.”
Calls for greater competition in Australia’s listings market have been building for some time, putting the ASX under even sharper scrutiny. There was a brief burst of optimism after ASIC approved Cboe Australia to list new companies in October, but that faded quickly when the Chicago-based operator revealed plans to exit the domestic market.
For Liu’s part, she said a key challenge for the ASX now is this regulatory scrutiny, which has left the organisation in a perpetual defensive stance and shaped its internal culture accordingly.
“They’re not really thinking strategically about, how do we grow? How do we deal with our issues? How do we make our system better? They’re not thinking about that.
“[Rather] they’re thinking about, how do we deal with this problem? How do we deal with that problem? So, I think mentality needs to change,” she told attendees.
Also at the briefing, Ten Cap founder and chief investment officer, Jason Todd, noted that the firm has recently worked closely with the ASX on launching its inaugural active exchange-traded fund (ETF).
Todd said that although the exchange described it as the fastest ETF processing it had completed, the experience “felt incredibly slow”.
“It felt through the process that you had to push at every stage to get someone to make a decision,” he said.
While Todd acknowledged that the launch was still completed in record time and he didn’t want to be overly critical, the process “didn’t feel natural” and was indicative of the company’s internal culture.
In June this year, ASIC launched a two-year trial whereby companies listing on the ASX via the fast-track process will now benefit from a shorter initial public offering (IPO) timeline designed to reduce deal execution risk.
Ten Cap previously shorted the ASX in August following its botched security upgrade, closing the position in October – a move Liu said ultimately paid off.
