ASX fined more than $1m by ASIC for pre-trade transparency failures

Australian share market operator ASX Limited (ASX: ASX) has been fined $1,050,000 following an investigation by the Australian Securities & Investments Commission (ASIC) that found it had been “careless” in failing to meet compliance on market integrity rules on thousands of occasions.

In issuing its notice, ASIC said the matter was “serious” and it had reasonable grounds to believe ASX breached the rule requiring pre-trade transparency 8,417 times between 4 April 2019 and 22 December 2022.

The rule requires ASX to make certain information about orders available on its trading system.

ASX has admitted it failed to do so with orders for various equity market products as a result of an incorrect system configuration.

ASIC says the pre-trade information is important because it assists with price formation, aids liquidity and enables investors to assess investment opportunities and value listed companies.

Market confidence crucial

“Confidence in Australia’s market operators is fundamental to fair and efficient markets,” ASIC chair Joe Longo said.

“This action demonstrates that ASIC will hold market operators to the highest standards.”

In determining its penalty, ASIC found there was no evidence of other losses suffered as a result of the conduct.

However it viewed the damage to public confidence in the operation of the market to be such that the consequences of the conduct were an aggravating factor.

“Technology and operational resilience for market operators is a strategic enforcement priority,” Mr Longo said.

“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.”

ASIC found that the circumstances were indicative of carelessness rather than recklessness or intentional misconduct.

It said that once it became aware, ASX took immediate steps to remedy the issue and notify ASIC.

Self-reported

ASX managing director and chief executive officer Helen Lofthouse said the error was identified in late 2022 and ASX immediately corrected it and brought it to ASIC’s attention.

She said ASX subsequently implemented a system fix to resolve the underlying issue and had fully cooperated with ASIC throughout its investigation of this matter.

ASIC noted in announcing the penalty that the incorrect system configuration went undetected until drawn to ASX’s attention by a market participant.

It also noted that, on at least two occasions before 22 December 2022, ASX could have but failed to identify the issue.

Appropriate transparency

“As a market operator, ASX strives towards the highest standards and this includes providing appropriate pre-trade transparency at all times,” Ms Lofthouse said.

“The availability of pre-trade information is fundamental to a fair and transparent market and we take seriously any impairment to this.”

“We are very disappointed this error happened.”

This matter is separate to the ongoing ASIC investigation into oversight, statements and disclosures around the CHESS replacement project, with which ASX is understood to be cooperating fully.