ASX fined $1.05m by ASIC, blames 'system configuration error'
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The news: ASX Limited has paid a penalty of $1.05 million following an investigation by the Australian Securities and Investments Commission (ASIC) into its compliance with the market integrity rules. It is the first time ASIC has issued an infringement notice to a market operator.
The numbers: ASIC found that ASX breached rules requiring pre-trade transparency on 8,417 occasions between 4 April 2019 and 22 December 2022. In its response to the infringement notice, ASX said that on average around 76 million order book changes are received per day on the ASX market.
The context: ASIC found that ASX breached its market integrity rules, which require the operator to make available pre-trade information for orders on the ASX market, unless an exception applies. ASX said the breach was due to a "system configuration error", which saw the operator fail to correctly configure certain order functionality on its trading system.
Pre-Trade information assists with price formation, aids liquidity, enables investors to assess investment opportunities and values listed companies.
According to ASIC, the incorrect system configuration went undetected until drawn to ASX's attention by a market participant, and "on at least two occasions" before 22 December 2022 ASX "could have, but did not, identify the issue." It noted that the ASX's conduct was "serious" but that there was no evidence of losses suffered as a result
The corporate regulator noted that while the issue was indicative of "carelessness rather than recklessness or intentional misconduct", the damage to public confidence in the operation of the market means ASX's conduct must be considered an aggravating factor in the determination of penalty.
This outcome is separate to ASIC’s investigation in relation to the ASX CHESS Replacement Program which is still is ongoing.
What they said: ASIC chair Joe Longo said: “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 standards".
“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,” he said.
ASX managing director and CEO Helen Lofthouse said: "As a market operator, ASX strives towards the highest standards and this includes providing appropriate pre-trade transparency at all times".
"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," she said.
The sources: ASIC media release, ASX announcement
