investor daily logo

ASIC chair reveals regulatory limits to ASX oversight

By Jessica Penny
3 minute read

The regulator will continue to supervise the work of the ASX toward introducing a new clearing and settlement system.

In his opening statement to the Parliamentary Joint Committee on Corporation and Financial Services, ASIC chair Joseph Longo defined the regulator’s powers in relation to the ASX.

Acknowledging their limitations, Mr Longo hinted that short of cancelling ASX’s licence, there wasn’t much ASIC could do.

“I note that our regulatory powers in relation to the ASX are limited, such as imposing licence conditions and cancelling the licence, which would, as you know, have significant ramifications across the economy,” Mr Longo said.


Opting for a more constructive approach, Mr Longo noted that the regulator has advised the government on necessary reforms and assured that it would continue to monitor ASX’s settlement and clearance operations.

“Together with the RBA, we will continue to closely supervise to ensure the ASX continues to deliver a secure settlement and clearance system that has longevity.”

“ASIC, with the Council of Financial Regulators, has advised the government on much-needed reforms to ensure a fit-for-purpose regulatory regime for the ASX, and to enhance Australia’s market infrastructure more broadly,” he continued.

Mr Longo also drew attention to the previously announced government reforms on Competition in Clearing and Settlement, proposed in 2016, and the financial market infrastructure reforms, proposed in 2021.

“We stand ready to work with the government to implement these reforms,” Mr Longo said, adding that “these would provide much-needed powers to ensure ASX’s compliance with the regulators’ expectations”.

Mr Longo’s comments follow an independent review by Accenture published last month, which identified a number of significant challenges with the CHESS replacement project’s design and its ability to meet ASX’s requirements.

What followed the findings was a joint letter addressed to the ASX by ASIC and the Reserve Bank (RBA), a letter in which the pair outlined the need for the ASX to recommit to its project delivery after announcing it was pausing activities on the already much-delayed project.

At the time, Mr Longo accused ASX of failing to demonstrate appropriate control of the program to date. “This has undermined legitimate expectations that the ASX can deliver a world-class, contemporary financial market infrastructure,” he added.

Reiterating these sentiments again this week, Mr Longo reassured that ASIC would keep an eye on the ASX to ensure it delivers.