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ASX cops $1m penalty in first infringement notice

By Jessica Penny
3 minute read

The market operator has been hit with an infringement notice for order information transparency failure.

ASX Limited has paid a penalty of $1,050,000 following an Australian Securities and Investments Commission (ASIC) investigation into its compliance with the Market Integrity Rules, marking the first time that ASIC has issued an infringement notice to a market operator.

In a statement on Thursday, ASIC said it issued the notice because it had reasonable grounds to believe that ASX breached the rule requiring pre-trade transparency on 8,417 occasions between 4 April 2019 and 22 December 2022.

Namely, the rule requires ASX to make certain information about orders available on its trading system. The regulatory body claimed that ASX failed to make that information available about orders for certain equity market products as a result of an incorrect system configuration.

Pre-trade information assists with price formation, aids liquidity, enables investors to assess investment opportunities and value listed companies.

“Confidence in Australia’s market operators is fundamental to fair and efficient markets. This action demonstrates that ASIC will hold market operators to the highest standard,” ASIC chair Joe Longo said.

ASIC clarified that this issue arose out of a failure by ASX to correctly configure certain order functionality on its trading system. The regulator considered ASX’s conduct was serious.

The incorrect system configuration went undetected until it was drawn to ASX’s attention by a market participant.

Allegedly, on at least two occasions before 22 December 2022, ASX could have, but did not, identify the issue.

It is understood that ASIC found that the consequences of the incorrect system configuration and ASX’s failure to detect and escalate for remediation was an aggravating factor when determining penalty.

ASIC also found there was no evidence of other losses suffered as a result of the conduct, but the damage to public confidence in the operation of the market is such that the consequences of the conduct are an aggravating factor in the determination of penalty.

“Technology and operational resilience for market operators is a strategic enforcement priority. ASIC will continue to take action to ensure that market operators and market participants have robust systems, controls and technological infrastructure in place to support Australia’s capital markets,” Longo explained.

Additionally, ASIC identified that the circumstances giving rise to the system configuration issue were indicative of carelessness rather than recklessness or intentional misconduct.

According to the regulator, once aware, ASX took immediate steps to remedy the issue and notify ASIC.