ASIC’s Inquiry Into The ASX Concludes in Condemnation And Calls for Change!

ASIC’s Inquiry into the ASX came to a close with the publication it its report, 9 months on from the launch of it. The mere commencement signalled that something had gone seriously, systemically wrong with one of the country’s most important pieces of economic infrastructure. The Final Report from that inquiry panel has now been delivered, and its findings are blunt: the problems at ASX are deep, cultural, and cannot be patched with incremental fixes.

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How We Got To the Point of an Inquiry Into the ASX

The proximate trigger for the inquiry was a dramatic systems failure on December 20, 2024. On that Friday afternoon (the last trading day before the Christmas break), the ASX’s CHESS system, the software that clears and settles every share transaction in the Australian equity market, failed to complete Batch Settlement.

The root cause was traced back to an error introduced in 2014 to the memory allocation logic, a coding flaw that had gone undetected for a decade before specific conditions in December 2024 caused it to surface at the worst possible moment. All settlements were pushed to the following Monday. A software breakdown prompted the bourse operator to defer all trade settlements from December 20 to December 23, 2024.

The response from regulators was swift and unusually forceful. The RBA took the unprecedented step of reassessing the compliance of ASX Clear and ASX Settlement with its Financial Stability Standards outside the usual annual assessment cycle. Both subsidiaries were downgraded from “partly observed” to “not observed” on the operational risk standard, a damning rating if ever there was one.

In March 2025, the RBA and ASIC sent a joint letter to ASX expressing their deep concern, not just about the December incident but about a pattern of behaviour. As RBA Governor Michele Bullock put it, ASX’s management of operational risk had been a concern for RBA staff and the Payments System Board for some time, and the CHESS incident underscored those concerns.

But the December failure, serious as it was, was really just the last straw. The problems at ASX ran deeper and longer. The regulator had been raising concerns about CHESS and operational risk for years, largely without satisfactory response. ASIC took the unprecedented step of commissioning an inquiry into ASX after years of persistent issues and operational failings.

In June 2025, ASIC formally appointed an expert panel chaired by Rob Whitfield, with Christine Holman and Guy Debelle as panel members. The panel’s brief was to examine governance, capability, and risk management across the entire ASX Group.

What the Inquiry Found

The panel’s work was exhaustive. It conducted around 140 stakeholder interviews, reviewed written submissions, undertook international benchmarking with similar entities, held focus groups with ASX staff, and reviewed nearly 10,000 documents. What it found was damning on multiple levels.

ASX’s focus on short-term financial performance and shareholder returns had compromised its obligations to operate critical national market infrastructure. Its strategy lacked the vision necessary for the critical role it plays. The organisation’s culture was defensive, which limited its ability to deliver meaningful change. And ASX’s governance structures did not ensure the independence of its Clearing and Settlement subsidiaries nor their required levels of investment.

In plain terms: ASX had been running one of Australia’s most vital financial institutions like a profit-maximising business, when its primary obligation is to function as critical public infrastructure. The report found that while some progress had been made, more of the same was not an option. The scale of transformation required was significant and could not be achieved through current tactical, incremental measures or business as usual.

The Final Report, released today, builds on the Interim Report issued in December 2025 and provides additional case study evidence and detail supporting the panel’s recommendations. An area requiring more reflection is the execution of ASX’s own market supervision responsibilities to monitor, supervise and enforce compliance with Operating and Listing Rules by participants and listed entities.

What Will Actually Change Now?

Following the December 2025 Interim Report, ASIC moved immediately to lock in concrete commitments from ASX before the Final Report was published. These include strengthening the independence and governance of ASX’s Clearing and Settlement Facilities Boards, a strategic reset of ASX’s transformation program ‘Accelerate’ with clear milestones and accountability for delivery, the imposition of an additional $150 million capital charge on ASX Limited, and a commitment to stronger leadership.

The capital charge is particularly significant. ASX must accumulate the additional $150 million in net tangible assets by 30 June 2027, and this capital is required to be held until the milestones identified in the reset Accelerate Program are completed and ASIC approves its staged reduction or release.

To fund this capital build, ASX has cut its dividend. The payout ratio policy range has been lowered from the previous 80-90% of underlying net profit after tax to a new range of 75-85%, and is expected to remain at the bottom end of this range for at least the next three dividends. ASX is also operating a discounted dividend reinvestment plan to further assist capital accumulation.

Governance changes are also in motion. The Clearing and Settlement Facility Boards are now comprised solely of independent directors following the resignation of three ASX directors from the CS Facility Boards in February 2026. Meanwhile, ASIC and the RBA are establishing a new joint supervisory model, creating tighter ongoing oversight than has existed before. The CHESS replacement itself, long delayed after a failed blockchain-based overhaul was abandoned in 2023, is now targeted for a Release One go-live in late April 2026, and will continue under active regulatory scrutiny.

What It Means for Investors

For those who own ASX shares (ASX:ASX) directly, the near-term picture is one of elevated costs and reduced returns. FY26 total expense growth guidance, including ASIC inquiry costs, is between 20% and 23%. The inquiry itself is costing the company $25-35m in operating expenses this financial year alone. The medium-term return on equity target has been trimmed, and capital expenditure remains elevated at $170-180m in FY26.

This is not a crisis, given that first-half FY26 operating revenue of $602.8m reflected strong growth of 11.2% on the prior year, but it does mean the path to earnings growth is more constrained and expensive than it was 18 months ago.

Conclusion

For the far larger group of investors who don’t own ASX shares but trade through the ASX exchange itself, the inquiry’s outcome is broadly positive. The systemic risk exposed by the December 2024 CHESS failure is now being addressed under intense, sustained regulatory scrutiny with real financial accountability attached. The proposed joint ASIC-RBA supervisory model means ASX can no longer manage its regulators as separate audiences.

There is also a longer-term implication for market confidence. Foreign capital flows into Australian equities are sensitive to perceptions of market infrastructure quality. An ASX that is genuinely reformed, with independent clearing and settlement boards, properly funded systems, and a culture less focused on short-term returns, is an ASX that supports a more attractive and competitive market for listings and investment. The pain being imposed on ASX shareholders today is, at least in principle, an investment in a more resilient market for everyone who uses it tomorrow.

The command ASIC has given to ASX is simple in concept if difficult in execution: embrace a new era of accountability. After years of deferred action, Australia’s financial market regulator has decided it can no longer afford to wait. And it’ll be watching our bourse closely to see if it lives up to its promises to change.