The Australian Securities and Investments Commission (ASIC) has concluded its investigation into ASX Ltd (ASX: ASX) relating to the market outage in November last year.
The ASX was down for almost an entire trading day after a technical glitch shut down systems.
ASIC stopped short of concluding a breach of ASX’s licence conditions. But has recommended several changes including the oversight of an independent expert.
The recommendation sounds similar to the ones the Victorian Government placed on Crown Resorts Ltd (ASX: CWN) last month. Is this ASX’s Crown moment?
Regulator falls short of calling out breach
The conclusion of ASIC’s investigation fell short of calling for a direct breach. However, the regulator has requested the following conditions as a result of the outage:
- appointing an independent expert to assess the changes
- appointing an independent expert to review ASX’s assurance program for the upcoming CHESS replacement program
- ongoing confirmation by the ASX board and management as to technology project readiness
The conditions will stop once ASIC receives the independent assurance report and ASX’s changes are complete.
ASIC predicts the conditions will take 12 to 18 months to implement.
The exact changes were not revealed in the announcement.
Not so different
It might sound strange to compare a securities exchange to a casino operator.
But in many ways Crown and the ASX are alike.
Both are monopoly assets. Crown doesn’t have any notable competition in its markets other than Star Entertainment Group Ltd (ASX: SGR) in specific locations.
Similarly, ASX’s only real competitor is Chi-X, which realistically has failed to make any real dent to date.
Furthermore, both are critical parts of their respective economies.
Crown is one of the largest employers and taxpayers in Victoria, while the ASX is critical to the functioning of financial markets in Australia.
Finally, each has had recent investigations by respective regulators.
And the subsequent conclusion of each investigation has led to largely the same outcome.
Keep on operating under the supervision of an expert while more onerous procedures are to be implemented.
My take
The cases of Crown and the ASX highlight the role of monopolies.
For regulators – and as an extension society – there is a fine balance between satisfying community expectations while not over penalising and creating negative second-order effects on employees, customers and government.
For investors, it demonstrates the resilience of owning companies that are firmly entrenched.
They’re very difficult to displace and therefore revenue and earnings are more reliable.
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