ASX Charts Sweeping Governance Overhaul and Capital Reinforcement Amid Regulatory Scrutiny

The Australian Securities Exchange has unveiled a comprehensive action plan formulated in collaboration with Australia’s financial regulator, responding to critical findings from an ongoing regulatory inquiry. The framework addresses operational resilience, risk infrastructure, and organizational culture—areas flagged as requiring immediate attention in a preliminary assessment, with a complete evaluation anticipated by Q1 2026.

Strategic Program Reset and Governance Transformation

ASX will fundamentally restructure its remediation initiative, broadening its mandate beyond corrective measures to encompass systemic risk mitigation and institutional resilience. This transformation, scheduled for completion by mid-2026, aligns with regulators’ recommendations for enhanced operational oversight. Concurrently, a major governance revamp will reshape leadership structures across critical market infrastructure entities. The boards overseeing settlement services, clearing operations, and central securities depository functions will transition to independent director compositions, excluding parent company representatives. This transition will roll out methodically, supported by dedicated transition resources and coordinated service delivery mechanisms.

New Regulatory Framework and Supervision Model

Regulators have endorsed a dual-supervision architecture involving the central bank alongside ASIC, representing a significant shift in how Australia’s exchange operates under regulatory oversight. The exchange has signaled support for this collaborative model, recognizing its importance in structuring the reset program and defining expectations. This joint approach aims to enhance systemic stability in core market infrastructure.

Capital Requirements and Financial Recalibration

Regulators have mandated an additional A$150 million in capital holdings above baseline requirements, reflecting elevated operational risk. This additional fixed capital must be accumulated by mid-2027 and remains restricted until the exchange demonstrates completion of key program milestones and receives regulatory clearance for staged release. The capital strengthening requirement will be funded through adjusted shareholder returns. ASX is reducing its dividend distribution range from 80%-90% to 75%-85% of underlying post-tax profits, with distributions expected to remain at the lower end for at least three payment cycles. A concessionary reinvestment program will supplement capital accumulation over this period.

Medium-Term Financial Impact

The heightened capital requirement will pressure return metrics going forward. The exchange has adjusted its medium-term return on equity guidance to 12.5%-14.0%, down from the previous 13.0%-14.5% range. Operating expense growth for fiscal 2026 is anticipated between 14% and 19% versus the prior year, with A$25-35 million attributable to inquiry-related costs. Stripping out these expenses, underlying business cost growth targets the upper band of 8%-11%. Technology infrastructure investment will range from A$170-180 million in fiscal 2026, declining to A$160-180 million in 2027 before moderating as modernization initiatives reach maturity.

The regulatory action underscores intensifying focus on exchange resilience and operational standards, with implementation commencing immediately across governance, technology, and capital management functions.